House of Commons

Wednesday 12th October 2011 Commons Chamber

Wednesday 12 October 2011

The House met at half-past Eleven o’clock

Prayers

Wednesday 12th October 2011 Commons Chamber

[Mr Speaker in the Chair]

Business before Questions

Transport for London (Supplemental Toll Provisions) Bill [Lords] (By Order)

Second Reading opposed and deferred until Tuesday 18 October (Standing Order No. 20).

Oral Answers to Questions

Wednesday 12th October 2011 Commons Chamber

The Secretary of State was asked—

[Chris Ruane (Vale of Clwyd) (Lab)]

1. What recent assessment she has made of the level of youth unemployment in Wales; and if she will make a statement.

[The Parliamentary Under-Secretary of State for Wales (Mr David Jones)]

The latest youth unemployment figures for Wales are disappointing, and I am sure that there is still much for us to do to ensure that the recession does not leave a legacy of workless young people. We will ensure that young unemployed people get the personalised help that they need to find full-time permanent jobs. As part of our reform of the welfare system, we are introducing a number of measures to support young people in finding employment.

[Chris Ruane]

Forty-six per cent. of the workers in my constituency, and 45% of the workers in the hon. Gentleman’s constituency, work in the public sector. The Government want to sack up to 25% of those workers: the theory is that they will be employed by the private sector. Given today’s huge increases in unemployment, where are the jobs going to come from for those public sector workers?

[Mr Jones]

The hon. Gentleman will know that this Government inherited the most appalling economic legacy from the Labour party. That party seems to think that there is a bottomless purse to fund public sector jobs, irrespective of the economic state of the country. However, I am sure he will pleased to know that in his constituency there are, according to the latest figures, 273 vacancies, and I suggest that he encourage his constituents to seek those places.

[Jonathan Evans (Cardiff North) (Con)]

Is my hon. Friend aware of the reports from the Joseph Rowntree Foundation and the Prince’s Trust, which make it clear that the fivefold increase in youth unemployment in Wales is the legacy left to this Government by those on the Labour Benches? Given that context, and bearing in mind the Prince’s Trust’s success in getting 75% of young people into employment, work or training, will he commit the Government to working closely with the Prince’s Trust and involving it closely in the Work programme?

[Mr Jones]

Like my hon. Friend, I commend the work of the Prince’s Trust, and my right hon. Friend the Secretary of State has already had meetings with its representatives. I also remind the House that the Welsh Government have a significant role to play. They are in charge of economic development and are responsible for training, which is key to reducing youth unemployment.

[Hywel Williams (Arfon) (PC)]

Is cutting the benefits for young people in order to encourage them to search for non-existent jobs not just a cruel mockery of their misfortune?

[Mr Jones]

I think that the hon. Gentleman will find that the Work programme, which this Government brought in, has introduced a level of tailored support for young people and others seeking work. The most important thing for people in the position of those he mentions is to regain work as quickly as possible.

[Mr Mark Williams (Ceredigion) (LD)]

The Minister will be aware of the excellent work on youth training undertaken by Ceredigion Training in my constituency, which equips young people with the skills they need to gain work. Does he therefore share my concern that the Welsh Assembly Government have cut the work-based learning grant to Ceredigion Training, which means fewer apprenticeships and fewer opportunities for young people to get back into work?

[Mr Jones]

As my hon. Friend points out, the issue of economic development is firmly in the hands of the Welsh Assembly Government, as indeed is training. That is entirely a matter for them, but I am bound to say that, given the current economic backdrop, I was surprised that the economic development budget was cut last week.

[Owen Smith (Pontypridd) (Lab)]

One of the flagship Government policies that was meant to help the private sector to grow in Wales was the national insurance holiday. That was meant to improve the prospects of 45,000 companies in Wales, but it has actually supported just 300—less than 0.7% of them. Will the Minister tell the Chancellor that it is not working in Wales and that he really needs to pull his finger out and help the 16,000 people who have found themselves on the dole as a result of this Government?

[Mr Jones]

The hon. Gentleman will find that the increase in unemployment is directly referable to the incompetent management of the economy by the Government whom he supported. Of course my right hon. Friend the Chancellor keeps such matters under constant review.

[John Howell (Henley) (Con)]

2. What discussions she has had with her ministerial colleagues on inward investment in Wales.

[The Secretary of State for Wales (Mrs Cheryl Gillan)]

I am keen to attract more inward investment to Wales, as that is crucial to the recovery of the Welsh economy. I am working closely with ministerial colleagues, the Welsh Government and business to create an environment where companies choose to come to invest. One of our best adverts for Wales is our fantastic Welsh rugby team, and we all wish them well for their game at the weekend. They are a powerful advert for inward investment in Wales.

[John Howell]

Inward investment can be materially helped through enterprise zones. Does my right hon. Friend therefore regret the Welsh Administration’s delay of six months in making a decision on enterprise zones?

[Mrs Gillan]

My hon. Friend is right, and echoes what I have said on many occasions. I work as closely as I can with the Welsh Government and I encouraged them to introduce enterprise zones, but we had six months of wasted opportunities. There is every indication that the enterprise zones might look similar to those that have been announced across the border in England. Two tranches have been announced in England and just the one in Wales, but I am delighted that the Welsh Government have finally announced enterprise zones for Welsh businesses.

[Kevin Brennan (Cardiff West) (Lab)]

The Secretary of State is right to mention the Welsh rugby team and the way that it can highlight Wales. When the Prime Minister of the United Kingdom comes in and sits next to her later, for Prime Minister’s questions, will she ask him to put the Welsh flag up over No. 10 Downing street this weekend, as he did with the cross of St George for the England football team during the World cup? [Interruption.]

[Mr Speaker]

Order. Hon. Members wish to hear the Secretary of State’s reply to this probing question.

[Mrs Gillan]

I can heartily endorse that recommendation. Whether the powers that be will be able to fly that flag I do not know, so I cannot give him that guarantee, but it will be flying proudly above Gwydyr house.

[Roger Williams (Brecon and Radnorshire) (LD)]

When I meet businesses in Wales, I am always impressed by the resilience they are showing during these difficult times. One issue that they always raise with me is that of business rates. What discussions has the Secretary of State had with the Assembly to build on the excellent work that local authorities are doing to reduce the burden of business rates to companies that wish to expand?

[Mrs Gillan]

As the hon. Gentleman knows, that is a matter for the Welsh Government, but I think the Welsh Government must carefully consider the conditions on the other side of the border in England, and ensure that inward investing companies and other companies in Wales are not disadvantaged in terms of taxation or non-tariff barriers. I encourage the hon. Gentleman to make his representations to the Welsh Government himself; I am sure that they will be interested in what he has to say.

[Mr Peter Hain (Neath) (Lab)]

As the Secretary of State will be aware, at least two coal mines in south Wales, Aberpergwm and Unity, have been in receipt of inward investment that is growing their employment and output. May I thank both mines for voluntarily helping to resource the rescue and investigation work following the terrible tragedy at the Gleision mine in the Swansea valley that caused the death of four experienced colliers, my constituents Charles Breslin, Philip Hill, Garry Jenkins and David Powell? May I also thank the Secretary of State for her support over this tragedy, which has included ensuring that the Government have agreed to provide the 25% uplift—equivalent to the charitable gift aid that could have been claimable—to the total raised by the Swansea Valley miners appeal fund, which is now rising towards £400,000, which shows an extraordinary and heartfelt public response? May I also thank the mines rescue service, the principal inspector of mines and the South Wales police for their dedicated and at times heroic work at Gleision?

[Mrs Gillan]

Like the right hon. Gentleman, I pay tribute to those who so valiantly led the rescue efforts in the immediate aftermath of last month’s tragedy at the Gleision mine, and I pay tribute to the right hon. Gentleman for his work in his constituency. He and I saw those efforts at first hand, and I know the impact that that event will have had on his local community. As the shadow Secretary of State says, I have agreed that the Government will contribute to the Swansea Valley miners appeal fund to cover the amount that the fund would have been able to claim back as gift aid while its application for charitable status was being processed. I am pleased to say that charitable status has now been secured, and we in the Wales Office are working with the fund organisers on the details of the Government payment.

[Mr Hain]

I am grateful to the Secretary of State for that. I believe that there are a number of important lessons from the Gleision tragedy for the future of mines safety and rescue. Will she therefore ensure that the Government delays the report of Professor Lofstedt, due by the end of this month, on regulations covering mining, among other sectors, so that account can be taken of a submission that I plan for her and her Cabinet colleagues?

[Mrs Gillan]

I understand that Professor Lofstedt is conducting an independent review of the overall regulatory framework covering health and safety legislation and its effectiveness. He issued a call for evidence in May and is now in the process of writing up his report. As this is an independent review, it would not be appropriate for my right hon. Friend the Minister with responsibility for employment or the Government to intervene in the timing of the report. However, I am sure that any lessons that can be learned from the investigation into the tragic events at the Gleision mine will be incorporated into any recommendations from Professor Lofstedt’s report that are taken forward by the Health and Safety Executive. I look forward to receiving the right hon. Gentleman’s submission on this subject.

[Neil Parish (Tiverton and Honiton) (Con)]

3. What recent discussions she has had with her ministerial colleagues and others on job creation in the private sector in Wales.

[Mel Stride (Central Devon) (Con)]

4. What recent discussions she has had with her ministerial colleagues and others on job creation in the private sector in Wales.

[The Secretary of State for Wales (Mrs Cheryl Gillan)]

I have regular discussions with ministerial colleagues and other interested parties on ways in which we can stimulate job creation in the private sector in Wales. We must create an environment in which the private sector can grow and prosper in order for businesses to create much-needed jobs in Wales, and we will continue to work with the Welsh Government to achieve that aim.

[Neil Parish]

I thank the Secretary of State for that answer. Will she look at the Bristol channel and the Severn, where there is the second highest rise and fall in tide in the world? A great deal of power could be produced there and a great number of jobs could be created to harness that power through tidal pools. May I ask her what we are doing about that?

[Mrs Gillan]

I think my hon. Friend knows that we have looked at this, and we do not intend to review the Severn tidal power situation before 2015—but it would be irresponsible to rule out such an important source of renewable energy for ever, as circumstances are likely to change down the line. As I have said before, to the shadow Secretary of State for Wales, if private funding for this project comes forward, we will consider it particularly seriously.

[Mel Stride]

As my right hon. Friend will know, under the previous Government there was far too much onerous employment legislation, much of which served simply as a brake on the growth of small and medium-sized enterprises both in Wales and throughout the United Kingdom. Does she therefore welcome, as I do, the fact that the Government will be doubling the period to qualify to go to an unfair dismissal tribunal, and that fees will also be charged thereafter to stop—

[Mr Speaker]

We are grateful to the hon. Gentleman.

[Mrs Gillan]

I think my hon. Friend knows that we are trying very hard to create the right conditions to encourage private sector growth, and particularly to make life easier for SMEs. He will know that we are also exempting them from audit requirements that will save SMEs in the UK up to £200 million a year. It is particularly important that we are exempting micro-businesses and start-ups from new domestic regulation until 2014. The point that he has raised is just another way in which we are trying to help private business to grow in the UK.

[Jessica Morden (Newport East) (Lab)]

A Sheffield Hallam university report published over the summer estimated that 30,000 people in Wales could lose their incapacity benefit as a result of the Government’s welfare changes, and could therefore be looking for work. How optimistic is the Secretary of State that the private sector will be able to create that level of employment?

[Mrs Gillan]

The hon. Lady makes a valid point. I know that the labour market statistics today have not brought good news, but I am pleased to report that there are 90,000 vacancies across the UK at the moment, including 12,638 in Wales. With the excellent job that is being carried out by Working Links and Jobcentre Plus, there are going to be many opportunities for people to find their way into work.

[Nia Griffith (Llanelli) (Lab)]

This morning we have seen a shocking increase in unemployment, with 16,000 more people in Wales desperate to find work—a massive 13.5% increase over the past three months—as a direct result of this Government’s policies. Given this huge rise in unemployment, plus the squeeze on household incomes in Wales as a result of the Government’s increase in VAT, the reduction in the real purchasing power of pensions and the cruel slashing of the winter fuel allowance at a time of rocketing energy and food prices, can the Secretary of State explain how her Government’s policies will stimulate consumer demand in Wales and get growth going? How on earth will they stem the spate of high street shop closures and put some sparkle back into—

[Mr Speaker]

I think we have got the thrust of it; we are grateful to the hon. Lady.

[Mrs Gillan]

May I extend a warm welcome to the hon. Lady, who is now on the Front Bench? She and I have had many conversations, and I wish her well. I am sure that she will complement the right hon. Member for Neath (Mr Hain) in her new role, and the Under-Secretary and I would like to extend our good wishes to her.

I take no joy from the figures this morning, but I do take joy from the fact that we have announced sector-based work academies. I hope that the hon. Lady will use her good offices with her party, and explain why the Labour party and the Welsh Government are cutting the enterprise budget, rather than using the money to freeze council tax in Wales, as it is being frozen in England.

[Albert Owen (Ynys Môn) (Lab)]

5. What assessment she has made of the effects of the Government’s economic policy on employment levels in Wales.

[The Parliamentary Under-Secretary of State for Wales (Mr David Jones)]

Through our economic policies, we are committed to delivering strong and sustainable growth balanced across the whole UK, including Wales, rather than concentrated in London and the south-east, as it was under the previous Government. We have made it clear that our top priority remains tackling the deficit while creating the right conditions for the private sector to expand in Wales and create jobs.

[Albert Owen]

I welcome measures taken by the Welsh Government to stimulate the economy in Wales, but the UK Government, at a time of high unemployment, high inflation and rising borrowing, have taken money out of the economy by putting up VAT. Does the Minister agree with the Federation of Small Businesses that it is time to consider a temporary reduction in VAT to stimulate the economy, particularly in sectors such as construction and tourism, to increase employment in Wales?

[Mr Jones]

Those are matters that my right hon. Friend the Chancellor keeps under constant review, but I am surprised that the hon. Gentleman does not appear to regret, as I do, that the Welsh Assembly Government have decided to cut their economic development budget at this difficult time.

[Alun Cairns (Vale of Glamorgan) (Con)]

Does the Minister accept that enterprise zones could create private sector employment in some of the most needy parts of Wales? Does he not think that the Welsh Government’s approach has been somewhat disjointed at best? Some prosperous parts have become enterprise zones, but some of the most needy parts, such as Barry in my constituency, have not.

[Mr Speaker]

May I remind the Minister that he is not responsible for the Welsh Assembly Government, so a pithy reply would be in order?

[Mr David Jones]

In all pithiness, I agree with my hon. Friend the Member for Vale of Glamorgan (Alun Cairns) that enterprise zones are key to economic development, and I regret that the Welsh Assembly Government have still not clarified their intentions in that regard.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

Lloyds TSB’s Wales business activity index for September reported the sharpest decrease in private sector employment for 27 months. What specific countervailing measures is the Minister arguing for with the Treasury to give the Welsh economy a competitive edge?

[Mr Jones]

I am sure that, like me, the hon. Gentleman will welcome today’s announcement of sector-based work academies. That will apply to the whole United Kingdom, including Wales. It will give young jobseekers the tools that they need to find employment more easily.

[Julian Smith (Skipton and Ripon) (Con)]

6. What recent discussions she has had on promoting economic growth in Wales.

[The Secretary of State for Wales (Mrs Cheryl Gillan)]

I have regular discussions with ministerial colleagues, the Welsh Government and other organisations on promoting economic growth in Wales. My business advisory group is meeting for the fourth time later this month. We discuss a wide range of issues affecting the Welsh economy, and that is fed into the Prime Minister’s own business advisory group.

[Julian Smith]

I thank my right hon. Friend for that answer. Does she agree that as well as exempting small businesses in Wales and the rest of the UK from domestic regulation, the Government must continue their radical approach to reducing red tape and regulation from Brussels?

[Mrs Gillan]

I agree with my hon. Friend. It is extremely important in this day and age, when we are up against such huge economic barriers, that we ensure that it is easy for businesses to start up and thrive in the UK, so that the UK becomes the best place to do business.

[Nick Smith (Blaenau Gwent) (Lab)]

Will the Secretary of State update the House on how the Wales Office is supporting economic growth in the newly announced enterprise zones, and will she meet representatives of my council, possible employers and me to talk about that? In Blaenau Gwent in the past 12 months, unemployment has gone up by a shocking 11.7%.

[Mrs Gillan]

I need to remind the hon. Gentleman that the enterprise zones in Wales are a devolved matter that falls to the Welsh Government. I would ask him to make his representations, as I did on his behalf and on behalf of many other Members of the House, to the Minister for Business, Enterprise, Technology and Science in Wales. Let me tell the hon. Gentleman what we are doing. We are increasing capital spending on roads and railways, creating a superfast broadband network, and cutting corporation tax and regulation. We are doing an awful lot to support businesses, and I want the Welsh Government to rise to the challenge, too. [Interruption.]

[Mr Speaker]

Order. There are far too many noisy private conversations taking place in the Chamber. I want to hear both the questions and the answers.

[Ian Lucas (Wrexham) (Lab)]

7. If she will assess the effects of changes to the feed-in tariff scheme on the solar industry in Wales.

[The Parliamentary Under-Secretary of State for Wales (Mr David Jones)]

We will consult on proposed changes to the feed-in tariff scheme, and will produce an impact assessment setting out the effects across the UK in the autumn. My right hon. Friend the Secretary of State and I have spoken to a number of businesses across the UK and understand their concerns in this regard.

[Ian Lucas]

Labour’s feed-in tariff created 300 jobs in my constituency. The Tories have increased unemployment in Wrexham in the past six months by 12.6%. Why are they reversing the successful Labour policy that is creating private sector jobs, when they are supposed to be favouring jobs and growth?

[Mr Jones]

I agree with the hon. Gentleman that Sharp is an extremely important employer in his constituency. He will be aware that the feed-in tariff scheme favoured large-scale solar farms, not the domestic installations, but I hope—indeed, I am sure—that he will welcome the announcement last month that Sharp has secured a multi-million-pound contract with Wrexham county borough council to install solar panels in 3,000 local authority homes.

[Jenny Willott (Cardiff Central) (LD)]

The solar technology industry is just one of the growing green technology industries that could be vital to boosting job creation in Wales. Does the Minister agree that strong Government support for those industries will not put the country out of business, but will stimulate investment in this area and help the Welsh economy to recover?

[Mr Jones]

My hon. Friend is entirely right. This Government are committed to pursuing the growth of green industries in the United Kingdom. [Interruption.]

[Mr Speaker]

Order. It is still far too noisy. I know the House will be united in wanting to hear Mr Peter Bone.

[Mr Peter Bone (Wellingborough) (Con)]

8. What progress has been made on establishing a commission on devolution and funding in Wales; and if she will make a statement.

[Mr Elfyn Llwyd (Dwyfor Meirionnydd) (PC)]

10. What recent representations she has received on the proposed Calman-style commission for Wales; and if she will make a statement.

[The Secretary of State for Wales (Mrs Cheryl Gillan)]

Yesterday I announced in a written ministerial statement to the House the terms of reference and membership of the commission on devolution in Wales, the Silk commission. The commission will review the present financial and constitutional arrangements in Wales. It will look first at the financial accountability of the National Assembly for Wales and the Welsh Government and will aim to report in the autumn of next year. Following that, the commission will examine the current constitutional arrangements and will report in 2013.

[Mr Bone]

In Wales public expenditure is more than £9,000 per person. In my constituency it is £2,000 less. Yet again, Labour has left Wales in a mess, and Mrs Bone wants to know what the Prime Minister and the Secretary of State are going to do about it.

[Mrs Gillan]

Mrs Bone, I am sure, is absolutely right when she says that the economy of this country was left in a complete mess by that lot over there on the Opposition Benches—but my hon. Friend has asked a fairly complex question about the Barnett formula. The Barnett formula is not being examined by the Silk commission; it is the subject of bilateral communications involving the Treasury and the devolved Administration Governments, because it is a matter that concerns the whole of the UK. The Silk commission is focused on matters affecting Wales directly.

[Mr Llwyd]

I very much welcome yesterday’s announcement on the commission on devolution in Wales. That was a commitment of the coalition Government in Wales. Why are the Holtham recommendations specifically not being considered by the commission? If all those recommendations are going to be dismissed there will be difficulty in ensuring cross-party support, which is very important for the commission.

[Mrs Gillan]

I thank the right hon. Gentleman for giving me the opportunity to correct him, because I think he has misunderstood the terms of reference, which were agreed across all four parties. I am delighted to see his party taking part in the work of the Silk commission. What the Silk commission will be looking at is the second part of the Holtham report, which I know the First Minister is not keen on because it is about taxation powers. What is excluded is merely the Barnett formula and something called the “Holtham floor”, which is part of the subject of the bilateral communications. May I reassure the right hon. Gentleman that I want to move forward, if I can, on the basis of consensus? I am delighted that his party has worked with me on the commission so far.

[Mr Llwyd]

As the right hon. Lady says that the report will be produced in 2013, will she ensure that there will be a provisional legislative slot if the commission says that some legislative changes are necessary within this Parliament?

[Mrs Gillan]

The right hon. Gentleman has enough experience of legislation in this House to know that that is not something I can commit to, but let me tell him that the report will come in two parts. The first report will, we hope, come at the end of 2012, and the later report on the shape of powers between the UK Government and the Welsh Government will come towards the end of 2013. I will bear in mind what he has said.

The Prime Minister was asked—

[Sir Alan Beith (Berwick-upon-Tweed) (LD)]

Q1. If he will list his official engagements for Wednesday 12 October.

[The Prime Minister (Mr David Cameron)]

I am sure that the whole House will wish to join me in paying tribute to Lance Corporal Jonathan McKinlay from 1st Battalion the Rifles and Marine David Fairbrother from Kilo Company 42 Commando Royal Marines. They were both extremely committed and courageous servicemen who have given their lives in the service of our country. Our thoughts and deepest sympathies should be with their families, friends and colleagues.

This morning I had meetings with ministerial colleagues and others. In addition to my duties in this House, I shall have further such meetings later today.

[Sir Alan Beith]

The whole House will want to endorse the Prime Minister’s words about our heroic service personnel and their families, and I think that most of us also want to see the earliest possible withdrawal of our combat troops from Afghanistan.

What will the Prime Minister do about that group of women already in their late 50s who have seen their state pension age rise from 60 to 64 and now face a further two-year increase from 64 to 66? The coalition had to reform the pension system and will be fairer to women, but this anomaly needs addressing.

[The Prime Minister]

My right hon. Friend is right to identify that it is of course right to equalise men and women’s state pension ages. That has been a long-term goal shared across the House of Commons. I also think that it is right to raise the retirement age to 66, as we have done. We know that a large group of people are affected by this transition and that some people will potentially have to work for an extra two years. We are looking at what transitional help we can give to this group of people and will make an announcement shortly.

[Edward Miliband (Doncaster North) (Lab)]

I join the Prime Minister in paying tribute to Lance Corporal Jonathan McKinlay from 1st Battalion the Rifles and Marine David Fairbrother from Kilo Company 42 Commando Royal Marines. They were exceptionally courageous men who died serving their country and our deepest condolences go to their family and friends.

A year ago, during our exchanges, the Prime Minister justified his economic policy by saying that unemployment would fall this year, next year and the year after. Given that unemployment has risen by 114,000, is it not time he admitted that his plan is not working?

[The Prime Minister]

First of all, these are very disappointing figures that have been announced today and every job that is lost is a tragedy for the person concerned and their family. That is why this Government will do everything we possibly can to help get people into work. That is why we have the Work programme, the biggest back-to-work programme since the 1930s, which will help 2.5 million people. That is why we have welfare reform to make sure that it always pays for people to be in work. That is why we are reforming our schools, including raising the participation age to 18 so that we end the scandal of 16 and 17-year-olds left on the dole, and that is why we have a record number of apprenticeships—360,000 this year. I accept that we have to do more to get our economy moving and get jobs for our people, but we must not abandon the plan that has given us record low interest rates.

[Edward Miliband]

We hear the same script month after month. It is not working. Does the Prime Minister not realise that today’s figures show that it is not working? It is his failure that means today in Britain we have nearly 1 million young people out of work. Why does he not accept some responsibility for doing something about it?

[The Prime Minister]

I accept responsibility for everything that happens in our economy, but I just sometimes wish that people who were in government for 13 years accepted some responsibility for the mess they made. This Government have pledged to do everything we can to get our economy moving. That is why we have cut petrol tax and corporation tax, why we are reforming the planning system, why we introduced the regional growth fund, why we are forcing the banks to lend money and why we have created 22 enterprise zones. I know what the right hon. Gentleman wants: he wants us to change course on reducing our deficit. If we changed course on reducing our deficit, we would end up with interest rates like those in Portugal, Spain, Italy and Greece and we would send our economy into a tailspin.

[Edward Miliband]

I want the Prime Minister to change course so that he has a credible plan to get people back to work in this country. What he does not seem to understand is that month after month, as unemployment goes up and the number of people claiming benefit goes up, the costs go up and fewer people are in work and paying taxes. To have a credible plan on the deficit, you need a credible plan for growth, and he does not have one. It is not just young people who are suffering. Can the Prime Minister tell us when was the last time that unemployment among women reached the levels it has today?

[The Prime Minister]

The right hon. Gentleman is wrong on his figures. There are 50,000 more women in work than there were at the time of the election, there are 239,000 more people in work than at the time of the election, and there are 500,000 more private sector jobs. He specifically asks about a credible growth plan. I would ask, where is his credible growth plan? Why is it that the former Chancellor of the Exchequer said this:

“If you don’t have a credible economic policy, you are simply not at the races”?

Why is it—[Interruption.]

[Mr Speaker]

Order. Whatever people think of what is being said on either side of the House, they must not shout their heads off. The Prime Minister and the Leader of the Opposition will be heard, and that is the end of it.

[The Prime Minister]

The fact is that our plan is supported by the CBI, by the Institute of Directors, by the business organisations, by the IMF, and by the OECD. The right hon. Gentleman cannot even get support from his own former Cabinet Ministers. The former Home Secretary says this:

“I think the economic proposition that Labour puts at the moment is unconvincing.”

If the right hon. Gentleman cannot convince his own party, how can he convince the country?

[Edward Miliband]

The Conservative Chair of the Prime Minister’s Select Committee says that his policies on growth are “inconsistent” and “incoherent”. He obviously cannot convince him, can he?

Of course, typically, the Prime Minister did not answer the question on women’s unemployment, so let me tell him: women’s unemployment is at its highest since 1988—the last time there was a Conservative Government in power. I have to say that instead of apologising four months late to my hon. Friend the Member for Wallasey (Ms Eagle) for saying, “Calm down, dear”, he should be apologising to the women of this country for what he is doing to our economy.

Let me ask the Prime Minister another question that maybe this time he will answer. Last year, in his Budget, the Chancellor announced a flagship policy on growth. He said that the national insurance holiday for start-up firms would help 400,000 businesses. Can the Prime Minister tell the House how many businesses have actually taken part?

[The Prime Minister]

Seven thousand.

On the issue of women in work, of course I want to see more women in work, and there are 50,000 more women in work than at the time of the last election. It is this Government who have introduced free child care for all vulnerable two-year-olds, who have extended child care for three and four-year-olds, who have increased the child tax credit by £290, and who, for the first time, have announced that we will be giving child care to all people working fewer than 16 hours, helping hundreds of thousands of women and families out of poverty into work and into a better life. That is what we are doing.

The question the right hon. Gentleman must address is the big picture, which is this: he cannot convince the former Home Secretary, the former Trade Minister or the former Chancellor that he has got any idea of what to do with the economy. The reason is that if we adopted his plan, we would not be working with the IMF to sort out the eurozone—we would be going to the IMF to ask for a loan.

[Edward Miliband]

In case the Prime Minister has not realised, when the Chancellor says that 400,000 firms will benefit and only 7,000 are, that should tell him something: it should tell him that his policies are not working. That policy is not working; his plan is not working. Why does he not, just for once, agree with us: cut VAT and put more money into people’s pockets, help the construction industry to get moving, and invest in getting young people back to work by having a bankers’ bonus tax?

[The Prime Minister]

When is the Labour party going to learn that one cannot borrow one’s way out of a debt crisis? It left us the biggest deficit, the most leveraged banks and the most indebted households, and what is its answer? It is to borrow more money. Is it any wonder that the former Trade and Investment Minister, Digby Jones, described the Labour leader’s conference speech as

“divisive and a kick in the teeth for the only sector that generates wealth that pays the tax and creates the jobs this country needs.”?

That is what a former Labour Minister said about a Labour policy. That is why the Labour leader has no credibility whatsoever.

[Edward Miliband]

What a terrible answer. I will take on the companies in this country that are not doing the right thing, such as the energy companies. We are seeing change in the energy sector today because of what I said.

On the day of the worst unemployment figures in 17 years, the Prime Minister is fighting to save the job of the Defence Secretary, but doing nothing to save the jobs of hundreds of thousands of people up and down this country. There is one rule for the Cabinet and another rule for everyone else.

[The Prime Minister]

The previous Labour leader thought that he had saved the world; after that answer, I think that this Labour leader is Walter Mitty. The Labour party has to accept some responsibility for the mess it made of the economy. It is the party that borrowed too much, spent too much, left us with unregulated banks and left us with the mess that we have to clear up. When one sees those two sitting on the Front Bench who worked for so long in the Treasury, one has to ask, one would not bring back Fred Goodwin to sort out the banks, so why would one bring them back to sort out the economy?

[Sir Peter Tapsell (Louth and Horncastle) (Con)]

Has my right hon. Friend noticed that since I put the point to him last month, the head of our Serious Fraud Office, Mr Richard Alderman, has publicly deplored the fact that no senior British bankers have been prosecuted for their irresponsibility, and has urged that legislation be introduced as soon as possible to empower his office to prosecute such offenders?

[The Prime Minister]

It is important that inquiries are conducted into what went wrong at RBS and HBOS, because we are left clearing up a mess made by the irresponsibility of others. If there is room for criminal prosecutions, of course those should happen. Our responsibility is to ensure that we regulate the banks and the financial industry properly in future. That is why we have put the Bank of England back at the heart of the job.

[Nia Griffith (Llanelli) (Lab)]

Q2. Will the Prime Minister publish a full list of all the Ministers and Downing street staff who, since May 2010, have met Mr Adam Werritty in an official or social capacity, including whether he as Prime Minister has met him?

[The Prime Minister]

I am very happy to look at that.

[Lorraine Fullbrook (South Ribble) (Con)]

Does the Prime Minister agree that in the light of the difficult times encountered by some of my constituents in South Ribble who work for BAE, it is even more important that this Government continue their excellent support for exports and their continued investment in the development of the Typhoon and new unmanned aerial vehicle systems?

[The Prime Minister]

I agree with my hon. Friend. Obviously, the position at BAE has been of concern. That is why we immediately put in place plans for an enterprise zone on each side of the Pennines to help with that important business. BAE is a great British company. It has a huge forward order book, not least because of our defence budget, through which we are investing in Typhoons, aircraft carriers and unmanned aerial drones. I will do everything I can to support that company, including promoting its exports abroad. I have had conversations with the Japanese and will soon be talking to the Saudi Arabians and others to do all that we can do to make sure that this great British company goes on being a great British success.

[Mr Andy Slaughter (Hammersmith) (Lab)]

Q3. Imperial Healthcare Trust, which offers outstanding clinical care and research in three major hospitals in west London, is being forced to make 5% per annum cuts for five years, so that is 25% of its £900 million a year budget. How does that fulfil the Prime Minister’s promise not to cut health services to my constituents?

[The Prime Minister]

We are increasing NHS spending throughout this Parliament, and, I have to say, that is a complete contrast with the Opposition’s policy. They now have a new health spokesman. I was worried that I would not have the same quantity of quotes from the new health spokesman, but he has not disappointed. He said this—very clear, very plain:

“It is irresponsible to increase NHS spending in real terms”.

That is Labour’s position—that it is irresponsible to increase health spending. We disagree.

[James Morris (Halesowen and Rowley Regis) (Con)]

Q4. Too many children in Britain today live in families that do not provide them with the loving and stable environment that they deserve, and that has led to many of our most pressing social problems. Would the Prime Minister agree that this Government need to do all they can to help some of Britain’s most problem families?

[The Prime Minister]

I completely agree with my hon. Friend. If we look at the evidence, we see that some of the most troubled families in our country get a huge number of interventions from the police, social services, education and the rest of it, but no one is really getting in there to help turn those families around, change what they do and give them a better chance. So we are establishing a new unit under the leadership of Louise Casey, who I think has been a superb official over the past decade, and we are going to be putting huge resources into turning around the 120,000 most troubled families in our country. I think we can make a huge difference for those families, and we can reduce the burden that they place on the taxpayer at the same time.

[Mr Denis MacShane (Rotherham) (Lab)]

Will the Prime Minister instruct our ambassador in Kiev to make representations on behalf of the Government and Parliament about the appalling show trial and prison sentence handed down to Yulia Tymoshenko, the former Prime Minister? Prime Ministers do make mistakes and lose elections, as she did, but she has been put on trial for policy decisions that she took. Will the Prime Minister make it clear—I am glad the Foreign Secretary is briefing him—that Ukraine will not be able to open membership talks with the EU, and that any hopes of liberalising visa access will go out of the window because of this disgraceful Stalinist show trial and sentence?

[The Prime Minister]

We completely agree that the treatment of Mrs Tymoshenko, whom I have met on previous occasions, is absolutely disgraceful. The Foreign Secretary has made a very strong statement about this. The Ukrainians need to know that if they leave the situation as it is, it will severely affect their relationship not only with the UK but with the European Union and NATO.

[Richard Fuller (Bedford) (Con)]

Q5. Small business, not more Government debt, is key to job creation, and entrepreneurship is a noble endeavour, so will the Prime Minister join me in welcoming the support of Bedfordshire university, Cranfield university, Colworth science park, Bedfordshire on Sunday and 100 business leaders in my constituency for setting up an investment fund and mentoring scheme to support early-stage businesses in Bedford? Will he ask his Ministers to work with me to see whether that can be replicated in other towns across the country?

[The Prime Minister]

I pay tribute to my hon. Friend for what he is doing in Bedford. This Government recognise that it is going to be small businesses that will provide the growth, jobs and wealth that this country needs. That is why we have an agreement with the banks to increase lending to small businesses, why we are providing extra rate relief to small businesses, why we are giving the smallest businesses a holiday from new regulation and why we have got the one-in, one-out rule for new regulation. I applaud all efforts at a local level to give small businesses the mentoring, help and support that they need to grow.

[Andrew Miller (Ellesmere Port and Neston) (Lab)]

Q6. Responding to the Science and Technology Committee’s report on forensic science, a Home Office Minister has said:“We don’t agree with the committee’s report. It mis-states a number of very significant points.”Given that the Home Office’s financial case was 50% adrift, and that it has now agreed with our argument that the national archive should be protected, will the Prime Minister urgently intervene and review the decision to close the Forensic Science Service? The country and the profession are now losing key scientific staff.

[The Prime Minister]

I will certainly look at what the hon. Gentleman says, but I looked at that decision in some detail at the time, having known well the Forensic Science Service from when I worked at the Home Office many years ago. The evidence was pretty overwhelming that the model was not working and that change was needed. That is what has happened. Sometimes it is better to make that change rather than endlessly review it.

[Mr Mark Spencer (Sherwood) (Con)]

The Prime Minister inherited a welfare system in which families were able to claim £2,000 a week in housing benefit, and in which some working families were worse off than those who were on benefits. What can he do to help those hard-working families in Sherwood who get out of bed and work hard because of their self-pride and responsibility?

[The Prime Minister]

My hon. Friend speaks for millions in the country when he says that what people want is a welfare system that helps people who want to put in, work hard and do the right thing. What we are doing, first, is putting in place a cap so that we do not have those absurd amounts of money in housing benefit going to individual families—as he says, sometimes, it is £2,000 a week. Secondly, universal credit will ensure that it is always worth while people working and always worth while working a little harder. Let us see whether the Labour party, after a decade of giving people something for nothing, are prepared to back that by voting for the tough caps in the Welfare Reform Bill.

[Pat Glass (North West Durham) (Lab)]

Q7. If a Minister breaks the ministerial code, should he or she keep their job?

[The Prime Minister]

The ministerial code is very clear that, in the end, it is for the Prime Minister to decide whether someone keeps their job or not. In the case of the Defence Secretary, when the Leader of the Opposition has called for an inquiry by the Cabinet Secretary, and when I have established such an inquiry, it is very important that we allow him to do his work to establish facts, and then a decision can be made. However, let me be clear: I think that the Defence Secretary has done an excellent job clearing up the complete mess that he was left by Labour.

[Mr Alan Reid (Argyll and Bute) (LD)]

Retirement ages must go up, but the timetable in the Pensions Bill is too fast for many women. I was pleased to hear the Prime Minister say earlier that he was looking at transitional arrangements, and I would hope that those will result in a significant slowing down of the increase in retirement age for many women.

[The Prime Minister]

As I have said, we have looked at this issue very carefully and we will be making an announcement shortly. We have to look at the most difficult cases of people who will have to do quite an extra amount of working time, but clearly it is right—one must look at the big picture—to equalise men’s and women’s pension arrangements, and to move to 66, given the extra longevity that we enjoy as a country. Given that, I hope that the hon. Gentleman will be pleased when the announcement is made.

[Keith Vaz (Leicester East) (Lab)]

Q8. Both the Prime Minister and the Leader of the Opposition are on record as supporting gender equality for future royal successions. Will the Prime Minister update the House on the consultation that he and the Deputy Prime Minister are having with other Commonwealth leaders on this issue? Does he agree that it is better that we resolve this matter before rather than after any future royal children are born?

[The Prime Minister]

I certainly believe that this issue should be sorted out—I am on the record as believing that, and I am sure that across the House there will be widespread support for it. In the consultation, I have written to the Heads of State and Prime Ministers of the other realms concerned, and we will have a meeting on the matter at the Commonwealth Heads of Government conference. This is not an easy issue to sort out. Many may have worries about starting a parliamentary or other legal process, but I am very clear that it is an issue that we ought to get sorted, and I would be delighted to play a part in doing that.

[Esther McVey (Wirral West) (Con)]

Does the Prime Minister agree with the recent advice from the shadow Treasury Minister, who said that we must not and cannot pick good winners and losers? To conceive of such a simplistic “sinners and winners” model shows a distinct misunderstanding of business?

[The Prime Minister]

My hon. Friend makes an important point. The greatest need in our economy right now is to generate wealth, jobs and investment. What did Labour do at its conference? It just launched a big attack on British business, when that is what will help us out of these difficulties.

[Alun Michael (Cardiff South and Penarth) (Lab/Co-op)]

Q9. Was the Prime Minister aware before today that his chief spokeswoman was a former colleague of Mr Adam Werritty?

[The Prime Minister]

As I have said, this whole issue is being looked at by the Cabinet Secretary, and he will produce his report. I would ask people to have a little patience—let the facts be established and the questions answered, and then we can move ahead.

[Nick de Bois (Enfield North) (Con)]

Is my right hon. Friend aware that nearly 40 Government Members have signed an amendment in my name requiring that all offenders convicted of using a knife in a threatening or endangering fashion will receive a custodial sentence, not only those over 18? Will he consider supporting this amendment?

[The Prime Minister]

I shall certainly look closely at what my hon. Friend says. I know that the Justice Secretary is doing this too. We want to move ahead with a mandatory sentence for adults, and we shall look very closely at the arguments that my hon. Friend makes.

[Kelvin Hopkins (Luton North) (Lab)]

Q10. Sir John Major said four days ago that the Government should use the euro crisis as an opportunity to loosen EU powers over Britain. His first priority was the common fisheries policy. When will the Prime Minister take Sir John’s advice and tell the EU that Britain intends to withdraw from the CFP?

[The Prime Minister]

I always listen carefully to Sir John’s advice, and he gives me some excellent advice. In the short term, Britain desperately needs to get behind the solution to the eurozone crisis, because it is having a chilling effect on the whole of the European economy, and the American economy as well. That is the first priority. I accept, however, that at the same time as doing that it will be important to get some safeguards for Britain. As eurozone countries go ahead and sort out their problems, we need safeguards to ensure that the single market goes on working for the United Kingdom.

[Simon Hart (Carmarthen West and South Pembrokeshire) (Con)]

Last weekend, B&Q opened a new store in Pembroke Dock creating 25 jobs and Ledwood engineering advertised 25 new jobs in the town. Jobcentre Plus in Pembroke Dock has 249 jobs on offer. Does the Prime Minister agree that there would be further good news if the banks honoured their pledge to commit to credit flow, and will he keep the pressure on and encourage businesses in Wales to advertise even more jobs?

[The Prime Minister]

We shall certainly keep the pressure on the banks. It is worth making the point that in spite of the difficulties, there are 500,000 new private sector jobs in our economy compared with the time of the election. However, we need to have in place all the things that help businesses to expand and grow. Bank finance is just one of those things. We have the Merlin agreement, which is increasing lending to small businesses, and we also have what the Chancellor has said about credit easing to ensure that we consider other ways of expanding credit in our economy.

[Jonathan Ashworth (Leicester South) (Lab)]

Q11. This week, I had the privilege of meeting Hafsah Ali and Joseph Hayat from the Ready for Work campaign. They are impressive young people campaigning against rising youth unemployment. Will the Prime Minister tell us what has happened to his vow earlier this year to reverse the trend of rising youth unemployment? Will he also tell the House when he last met a young unemployed person?

[The Prime Minister]

Youth unemployment has been rising since 2004—it went up during the growth years as well as in the difficult years. We need a comprehensive strategy that deals with all the problems of youth unemployment, including the fact that there are too many people leaving school aged 16 who spent 13 years under a Labour Education Secretary—so the Labour party needs to take some responsibility—and who left school without qualifications to help them get a job. This is about ensuring that we have better education, a welfare system that helps people into work and a Work programme that provides not phoney jobs, as the future jobs fund did, but real work for real young people.

[Henry Smith (Crawley) (Con)]

A recent TaxPayers Alliance report revealed—[Hon. Members: “Ahh!”]—that 38 union leaders were remunerated at more than £100,000 each, including Derek Simpson of Unite, who received more than £500,000. Does the Prime Minister agree that it is time for union boss pay restraint?

[The Prime Minister]

It is interesting that Labour Members always listen to the trade unions, but never to the TaxPayers Alliance. One reason is that they do not want to hear about excessive pay in the public sector, local government or among their paymasters, the trade unions.

[Steve Rotheram (Liverpool, Walton) (Lab)]

Here is another question that the Prime Minister will not want to answer. Will he get a grip of his Back Benchers following last night’s debacle in the Chamber relating to the business of the House on 17 October? Does he understand that the perception out there in the real world is that some MPs would rather talk about their own pensions than discuss a 22-year-old injustice and the deaths of 96 men, women and children?

[The Prime Minister]

Let me answer the hon. Gentleman directly. We are going to protect the time for that absolutely vital debate. On the issue of MPs’ pensions, it is very clear that we have to show restraint at a time when the rest of the public sector is being asked to show restraint. So because of what happened last night, there will have to be a debate, but it will not eat into the time for the very important debate that he mentioned and which I know many Members care deeply about.

[Christopher Pincher (Tamworth) (Con)]

What action is my right hon. Friend taking to reintroduce rigour into the education system and end the ridiculous situation under the previous Government of 22% of students doing proper academic studies?

[The Prime Minister]

The Education Secretary is doing a superb job of focusing schools on results, including in English and maths, ensuring that we look at the English baccalaureate, which includes the core subjects that employers and colleges really value, and doing some simple and straightforward things that were not done for 13 years, such as ensuring that punctuation and grammar actually count when someone does an exam.

[Ms Margaret Ritchie (South Down) (SDLP)]

The Prime Minister met the Finucane family yesterday, so will he now reflect on the comments made by an Taoiseach in relation to that meeting and the outcomes, and the agreement made by both Governments at the Weston Park talks in 2001 that there should be an independent public inquiry?

[The Prime Minister]

Of course I have reflected incredibly carefully on what was said yesterday, and I have reflected on this whole issue for many months since becoming Prime Minister. I profoundly believe that the right thing for the Finucane family, for Northern Ireland and for everyone in the United Kingdom is not to have another costly and open-ended public inquiry, which may not find the answer, but instead for the British Government to do the really important thing, which is to open up and tell the truth about what happened 22 years ago. We do not need an inquiry to do that; that is why my right hon. Friend the Secretary of State for Northern Ireland will be making a statement explaining exactly how we are going to do it and who will be involved. In the end, the greatest healer is the truth. Frank acknowledgement of what went wrong, an apology for what happened—that is what is required. Let us not have another Saville process to get there; let us get there more quickly and do the right thing.

[Mr Lee Scott (Ilford North) (Con)]

Will my right hon. Friend join me in welcoming the news that it seems that Gilad Shalit will be released in the next few days, which could well go a long way towards peace in the area?

[The Prime Minister]

I am very grateful to my hon. Friend for raising this case. What that young soldier has been through for those weeks, months and years is something that anyone in this House would find difficult to contemplate. If it is the case that he will be coming home soon, I wish him, his family and everyone in Israel well.

[Mr Speaker]

Order. The following statement is on an extremely important matter. May I appeal to right hon. and hon. Members who are leaving the Chamber to do so quickly and quietly, so that I and those remaining can hear the Secretary of State for Northern Ireland?

Pat Finucane

Wednesday 12th October 2011 Commons Chamber

12:32

[The Secretary of State for Northern Ireland (Mr Owen Paterson)]

With permission, I would like to make a statement. Following my statement to the House last November in relation to the murder of Mr Patrick Finucane, I have considered this case very carefully. I want to set out today how the Government intend to proceed.

The murder of Mr Finucane, a Belfast solicitor, in front of his family on 12 February 1989 was a terrible crime. There have been long-standing allegations of security force collusion in his murder. The former Metropolitan Police Commissioner Lord Stevens was asked to investigate the murder in 1999. He published his overview report in 2003, concluding that there was “collusion”, that the murder “could have been prevented” and that the original investigation of the murder

“should have resulted in the early arrest and detection of his killers.”

When he was asked by the previous Government to consider the question of a public inquiry, Judge Cory found in 2004

“strong evidence that collusive acts were committed by the Army…the RUC…and the Security Service.”

My right hon. Friend the Prime Minister invited the family to Downing street yesterday so that he could apologise to them in person and on behalf of the Government for state collusion in the murder of Patrick Finucane.

The Government accept the clear conclusions of Lord Stevens and Judge Cory that there was collusion. I want to reiterate the Government’s apology in the House today. The Government are deeply sorry for what happened. Despite the clear conclusions of previous investigations and reports, there is still only limited information in the public domain. That is why my right hon. Friend the Prime Minister and I have committed to establishing a further process to ensure that the truth is revealed. Accepting collusion is not sufficient in itself. The public now need to know the extent and nature of that collusion. I have, therefore, asked the distinguished former United Nations war crimes prosecutor Sir Desmond de Silva QC to conduct an independent review to produce a full public account of any state involvement in the murder.

Sir Desmond is an internationally respected QC who will carry out his work completely independently of Government. He has worked for the United Nations on major international issues in Serbia and Sierra Leone. In 2005, Kofi Annan appointed him to be chief prosecutor for the Special Court for Sierra Leone. In 2010, he was appointed by the United Nations Human Rights Council to the independent fact-finding mission to investigate the Israeli interception of a Gaza aid flotilla. His track record in carrying out this work speaks for itself.

Sir Desmond’s terms of reference are to draw

“from the extensive investigations that have already taken place, to produce a full public account of any involvement by the Army, the Royal Ulster Constabulary, the Security Service or other UK Government body in the murder of Patrick Finucane. The review will have full access to the Stevens archive and all Government papers, including any Ministry of Defence, Security Service, Home Office, Cabinet Office or Northern Ireland Office files that”

Sir Desmond believes

“are relevant.”

The account will be provided to me

“by December 2012, for the purpose of its publication.”

I have agreed the terms of reference with Sir Desmond, and I would stress that he is being given unrestricted access to these documents. He will be free to meet any individuals who can assist him in his task. It is, of course, open to him to invite or consider submissions as he sees fit.

The review will have the full support and co-operation of all Government Departments and agencies in carrying out its work. I have spoken to the Chief Constable, who has given his assurance that Sir Desmond will have the full co-operation of the Police Service of Northern Ireland. This Government have demonstrated in the Bloody Sunday, Billy Wright and Rosemary Nelson cases that we will publish independent reports without delay. The same checking and publication arrangements will be put in place.

This has been an exceptionally long-running issue. The previous Government sought to resolve the issue after the 2004 commitment to hold an inquiry but were unable to reach an agreed way forward with the family. I am disappointed that the family did not feel able to support the process that my right hon. Friend the Prime Minister and I outlined to them yesterday. I fully recognise that the family have pursued their long campaign to find out the truth with great determination. We do not need a statutory inquiry to tell us that there was collusion. We accept that, and my apology in the House today reflects this. The task now is to uncover the details of this murder. The public should not be kept waiting for many more years for the truth to be revealed.

The Government have taken a bold step by asking an internationally respected figure to produce a full public account. Details in papers and statements that have been kept secret for decades will finally be exposed. The House will be aware of the extensive investigations that have already taken place in this case. I am clear that we do not need to repeat all the work that Lord Stevens has already carried out for the truth to be revealed. The investigations into the murder of Patrick Finucane have produced a huge amount of material. One man, Kenneth Barrett, was prosecuted and convicted of the murder in 2004. Taken together, the Stevens investigations took 9,256 witness statements. The Stevens documentary archive extends to more than 1 million pages; 16,194 exhibits were seized. This was one of the largest police investigations in UK history.

Lord Stevens carried out a police investigation to bring forward evidence for prosecutions. A 19-page summary report was produced in 2003, but the Stevens investigation was not designed to provide a public account of what happened. That is why Sir Desmond de Silva will now have full access to the Stevens files and all Government papers to ensure that the full facts are finally set out. The House will not want to pre-empt the details of Sir Desmond’s report. When the report is published, the Government will not hide from the truth, however difficult.

I strongly believe that this will be the quickest and most effective way of getting to the truth. Experience has shown that public inquiries into the events of the troubles take many years and can be subject to prolonged litigation, which delays the truth emerging. As my right hon. Friend the Prime Minister and I have made clear for some time, we do not believe that more costly and open-ended inquiries are the right way to deal with Northern Ireland’s past.

I am acutely conscious that the conflict in Northern Ireland saw over 3,500 people from all parts of the community killed and tens of thousands more injured. We should never forget the many terrible atrocities that took place. More than 1,000 of those killed were members of the security forces. I want to be clear that the overwhelming majority of those who served in the security forces in Northern Ireland did so with outstanding courage, professionalism and even-handedness in upholding democracy and the rule of law. The whole House will agree that we owe them an enormous debt of gratitude.

The murder of Patrick Finucane has been one of the longest-running and most contentious issues in Northern Ireland’s recent history. The appointment of an internationally respected and wholly independent figure to produce a full public account demonstrates the Government’s determination that the truth about this murder should be finally revealed. The House will recognise the spirit of openness and frankness with which we are dealing with this difficult issue. I would encourage everyone to judge the process we have established by its results. I commend this statement to the House.

[Vernon Coaker (Gedling) (Lab)]

May I first thank the Secretary of State for early sight of his statement and for the welcome that he has on many occasions extended to me in my new post? I greatly appreciate it, as I do the welcome I have received from many others, too. I am delighted to have been appointed the shadow Secretary of State for Northern Ireland and I look forward to working in a bipartisan way with the Secretary of State whenever possible, as well as to working closely with the Northern Ireland Executive, and all their parties and representatives. I will, however, hold the Government to account and challenge them, where necessary.

Every community in Northern Ireland has suffered outrages, atrocities and murders, but today we are reflecting on the murder of Pat Finucane. His wife was wounded in the attack and his three children witnessed what no child ever should—the murder of their father.

Thirteen months ago, my right hon. Friend the Member for St Helens South and Whiston (Mr Woodward), to whom I pay tribute today for all the work he did in Northern Ireland, asked the Secretary of State to honour the commitments of a previous Prime Minister and previous Secretaries of State to hold an inquiry into the murder of Pat Finucane. That commitment was made as a result of an agreement between the British and Irish Governments at Weston Park in 2001. If peace and reconciliation are to be taken forward, we need to respect such agreements. The progress that has been made in Northern Ireland is built on trust. As we have heard from Judge Cory’s report, public inquiries have been held into the cases of Robert Hamill, Rosemary Nelson and Billy Wright, but not into that of Pat Finucane.

It was a source of great regret to us, as the last Government, that we were not able to agree terms of reference with the Finucane family for an inquiry to take place under the Inquiries Act 2005, but today the Secretary of State has told us of his decision that there will no inquiry at all. Instead the Government have announced an inadequate review, although the whole country will welcome the apology. We are disappointed by that decision, and think that the Secretary of State should honour commitments that have been made.

The incredible scenes yesterday of the Finucane family at Downing street expressing their feelings of anger and outrage at having been completely let down by the Government show that this is no way in which to deal with such a difficult and sensitive issue. Will the Secretary of State tell us why he allowed the Finucane family to believe for so long that an inquiry would be offered to them? What discussions did he have with them before informing them of his decision? What advice did he give the Prime Minister that led the Prime Minister to invite the family to Downing street? They clearly believed that they would be offered something that would be acceptable to them; otherwise, why raise false hopes? What discussions had the Secretary of State had with his counterpart in the Irish Government before he made his decision?

Why, on the day on which the Irish Government extended by six months the Smithwick inquiry into the murders of Chief Superintendent Breen and Superintendent Buchanan regarding alleged Garda collusion, did the Secretary of State choose to deny an inquiry to the Finucane family? Does he accept that, while any form of inquiry takes time and carries a financial cost, it is possible for such inquiries to be both reasonable and not, in themselves, a barrier to the pursuit of justice? As for the proposed review of the Finucane papers, will he tell us how representations—including any from the family—can be made, what the expected cost of such a review will be, where the hearings will be held, whether any will be held in secret, and whether witnesses will be called?

Everything that has been achieved in Northern Ireland since the mid-1990s has been achieved with consensus. The Belfast, St Andrews and Hillsborough Castle agreements were all achieved by means of consensus. The Northern Ireland Executive operate by consensus. There are many horrors from the past, many atrocities, many outrages on the part of both loyalist and republican terrorists, but there is an opportunity for Northern Ireland to escape the grip of the past by confronting the truth about past events. Will the Secretary of State therefore tell us what the Government’s policy is for dealing with the past? Having denied a public inquiry into the death of Pat Finucane, will he tell us what additional resources he will provide for the Historical Enquiries Team?

The people of Northern Ireland have made real progress, but we must never take such progress for granted. It has taken real effort, commitment and trust. I agree with the Prime Minister: let us do the right thing. May I ask the Secretary of State to think again about an inquiry into the murder of Pat Finucane because it is the right thing to do? Seeking the truth and honouring agreements means that the cause of justice is served, and with it the cause of a better future for Northern Ireland.

[Mr Paterson]

Let me begin by congratulating the hon. Member for Gedling (Vernon Coaker) on his appointment to a difficult and important position. I warmly welcome his view that we should approach Northern Ireland issues in a bipartisan manner. He is sitting next to the right hon. Member for Neath (Mr Hain). The right hon. Gentleman, the right hon. Member for Torfaen (Paul Murphy) and the right hon. Member for St Helens South and Whiston (Mr Woodward)—who are also present—all played a distinguished part in bringing Northern Ireland to where it is now, continuing work which, in fairness, began under Sir John Major, whose role is often forgotten. I very much hope that we shall continue to work closely with one another. We met privately on Monday, and we have talked today. My door is always open, and I hope that we shall discuss these matters together.

The hon. Gentleman asked about the chronology. I wrote to the Finucane family within weeks—on 28 June last year—asking to meet them. I met Mrs Finucane in November last year, and I think I was the first Secretary of State to meet her since the right hon. Member for Neath met her in 2006. I said then that we had inherited an impasse. We entirely respected the position of the Labour Government, who had committed themselves to a public inquiry, but the right hon. Member for Torfaen had introduced the Inquiries Act 2005, and there appeared to be a jam. We wanted to unlock that jam, and we went into the process in a genuinely open-minded way.

On 11 November last year I issued a written ministerial statement, which the hon. Gentleman will have read, setting out various criteria against which we would make a judgment and inviting representations. It was a very open process, and we took representations. We were still in discussion with the family at the end of the two months, and we extended the period for a further two months. Until yesterday, I last saw Mrs Finucane in Washington on St Patrick’s day. I gave her an assurance that we wanted to come to a conclusion and resolve the impasse, but we could not do so during the Assembly election period. I promised that that would happen soon after.

It has taken longer, however. This has not been an easy issue to resolve, but what we have done is incredibly bold. We believe that by inviting the family to Downing street so that the Prime Minister can make an apology in person, we have moved the whole argument on.

The original justification for a public inquiry was, bluntly, to put the British Government on the spot and to prove that collusion had happened. We have accepted Stevens and Cory, and by making this bold apology—the Prime Minister made it in a full and frank manner, and I have repeated it today on the Floor of the House—we believe we have created an opportunity to move the argument on.

The question now is how do we get to the truth. That was clearly stated towards the end of today’s Prime Minister’s questions. As we have made clear in the build-up to this statement, we firmly believe that costly open-ended inquiries are not necessarily the best way to get to the truth. Speed is also an issue. Past inquiries have taken a long time. The hon. Member for Gedling mentioned Smithwick. That offers a classic example of the trouble we can get into with an inquiry. It had to be extended. The new Government tried to get an interim report in June and to limit the process to November, but it looks as though they will have to extend that.

What we have done is radical and bold. We have made a full apology, and we now have an opportunity to put in place a new process. There are 1 million documents and there will be more than 9,000 witness statements. That is where the truth lies, and we want to get the truth out. I hope that, on reflection, the hon. Gentleman will come round to agreeing that our approach is novel, bold and brave. It will cost approximately £1.5 million. The main offices will be in London, but obviously that is up to Sir Desmond, and he will certainly be visiting Belfast.

I met Sir Desmond this morning. I have appointed him, and his letter of appointment will be in the Library. He is very keen to get going and to meet the family. How he relates to the family and others is entirely up to him. He can invite people to attend. He does not have the power to demand that witnesses attend, but he will have powers—real powers, I hope—to get access to a huge archive of data. That is where the truth lies—we know the truth is in there—and we now all have an interest in getting to the truth.

The hon. Gentleman also asked about the past. As he knows, that is, sadly, a fraught issue. The Minister of State and I have been holding talks since we came into office last June; we have talked to all the political parties and to numerous interest groups. I know about the debate in the Assembly this week. Sadly, as the hon. Gentleman will find out when he goes there on Thursday, there is no consensus on the past. He mentioned the Historical Enquiries Team, which is looking into 3,268 deaths. We are very supportive of it and have always supported it, and we know that it is giving extraordinarily high levels of satisfaction to the families who have so far received reports, but oversight of it is a devolved responsibility, so the hon. Gentleman should discuss funding issues with the Northern Ireland Justice Minister, David Ford.

The Government in Westminster do not own the past. The solution to the past lies very much in the hands of local politicians. We will help to facilitate things, however. I will continue our talks and I will make further statements on our approach soon.

[Mr Laurence Robertson (Tewkesbury) (Con)]

I thank the Secretary of State for providing me with early sight of the statement, and I agree with him that accepting that there was collusion is not in itself enough, and that we need to get to the truth of who did what. If that is established, will he confirm that any necessary prosecutions will go ahead? Although it is totally right that we praise the quality of the people who served in the security forces in the past and the outstanding way in which they carry out their work now, we must find out the truth in order to protect the image of those people, who deservedly have a high reputation.

I do not believe that it was necessary to spend so much money on past inquiries. It was the Prime Minister’s response to the Saville inquiry that satisfied people in Northern Ireland. Since then, we have had inquiries that were, perhaps, expensive and that did not reach the truth. I therefore support the Secretary of State’s decision and agree that what is important is not how we get to the truth, but actually getting to the truth.

[Mr Paterson]

I am grateful to the Select Committee Chairman for his support for what we propose to do. Decisions on prosecutions are entirely in the hands of the local Director of Public Prosecutions, so if this review reveals information that justifies the DPP taking action, that is entirely down to him. As I am sure the Chairman knows, on seeing the Stevens papers the previous DPP found that not enough cases met the threshold requirements. I entirely endorse the Chairman’s comments on getting to the truth so that we can honour the vast majority of those who worked in the security forces, bravely defending law and order and democracy. That is exactly what we want to do. There is no offence of collusion, so we need to get to the detail, and I am confident Sir Desmond will do so.

[Ms Margaret Ritchie (South Down) (SDLP)]

I thank the Secretary of State for his statement. He said: “The public now need to know the extent and nature of that collusion” and the “task now is to uncover the details of this murder.” How can that possibly be achieved when Sir Desmond cannot compel witnesses to give evidence to his inquiry—which is not really an inquiry? That has created grave disappointment in Northern Ireland. I ask the Secretary of State to review yesterday’s decision and to establish an independent public inquiry that will empower witnesses to give evidence about the true nature and extent of collusion.

[Mr Paterson]

I am grateful to the hon. Lady for her question. However, the simple answer to it is no; we are cracking on. We think we have found a solution to the conundrum that was not resolved by the last Government. They had the clear policy of holding a public inquiry, but that was not acceptable under the 2005 Act. We think that through our bold measure of a public and personal apology to the family and going ahead with a review of this huge archive—1 million pages, 9,000-plus witness statements, 16,000 exhibits—we will get to the truth. We strongly believe that this is the right course of action, and that we can then move on from this impasse, which we must do because the situation has been festering.

[Stephen Lloyd (Eastbourne) (LD)]

I welcome the Secretary of State’s announcement and share his view that the independent review should be conducted by such an honourable, experienced and reputable figure as Sir Desmond de Silva; I believe this is the right way forward. I also appreciate the Secretary of State’s commitment that all arms of the Government will offer unrestricted access to Sir Desmond. The murder of Patrick Finucane was a desperate and despicable act and I applaud the Government’s determination to get to the truth. Finally, may I ask the Secretary of State to keep the House informed of the progress of Sir Desmond’s investigation?

[Mr Paterson]

I welcome the hon. Gentleman’s comments. Sir Desmond is an independent figure, and it is not for us to interfere in any way in how he conducts the review and the manner in which he proceeds. We have to get the message across that he is an independent figure, and a man of extraordinary integrity and international standing. He is not going to take any advice or accept any interference from the Government. That is not his role. We have appointed him, he is independent, and it is up to him to report back to us in December 2012.

[Mr Shaun Woodward (St Helens South and Whiston) (Lab)]

I have no doubt that the Secretary of State means well, but I think he is wrong. The inquiry was set up by Tony Blair as part of the peace process, and in breaking the promise that we gave, we are damaging the very foundations of that process. The independent inquiry was fair to everyone; it was fair to the family and the soldiers.

Let me set out my fear. The Secretary of State has said today that he has reached a verdict: there was state collusion. No account has been given of the process by which that verdict has now been reached, however, and we do not know collusion by whom or collusion about what. In this process, we must be fair to the armed forces: we must be fair to those soldiers and members of the police who may need legal representation now. What are they meant to do? Will the Secretary of State guarantee that any men and women who may face prosecution in the future because of his verdict today will be able to have a fair trial?

[Mr Paterson]

I am sorry that the right hon. Gentleman has not supported what we have done. I pay tribute to his work as Secretary of State. He managed to pull off the great coup of seeing the final plank of devolution put in place. Getting the devolution of policing and justice was not an easy task. We worked together, supporting him strongly at the time, and it was a considerable achievement. The House should recognise that and be grateful.

Obviously, given the right hon. Gentleman’s knowledge, I am disappointed by his comments. I do not wish to make a tiresome point, but I did write to Mrs Finucane and met her—he did not. He had three years to resolve this and did not do so. We talked about it privately and we both know how extraordinarily difficult the conundrum was. He stuck to the line, which we have heard again from his successor—it is totally understandable and coherent—that a public inquiry was offered, under the Inquiries Act 2005. We inherited a logjam; I really felt that this issue was festering. People must get hold of the boldness of what we have done. The Prime Minister has invited the family in to apologise in person. We are going to have a really thorough review. Sir Desmond is not a patsy; he is a man of extraordinary integrity and international repute. I fear that the report may be very difficult for us, but we will come to the House, as we did with Saville, with Nelson and with Wright, and make appropriate comments.

The right hon. Gentleman mentions individuals. Stevens, after probably the longest criminal investigation in British history, said clearly in his report:

“I have uncovered enough evidence to lead me to believe that”—

the murder—

of Patrick Finucane…could have been prevented.”

He continued:

“I conclude there was collusion in”—

the murder—

“and the circumstances surrounding”

it. The problem is that there is no offence of collusion, which is why we have appointed Sir Desmond. As I said in answer to a previous question, should evidence come forward that, in the opinion of the DPP, goes over the threshold, the legal process will take its course.

[Sir Peter Bottomley (Worthing West) (Con)]

This widespread though not unanimous support for the statement by the Secretary of State and the Prime Minister has been seen before when other Prime Ministers and Secretaries of State have taken initiatives to break logjams. I put it to the Secretary of State that getting to the truth is an important part of coming to terms with history. May I end by saying that we should respect and support lawyers, journalists and families who stand by those who are victims or potential victims, those who are accused and even those who have been convicted, because representing the unpopular and the marginal is an important part of an open and democratic society?

[Mr Paterson]

I welcome my hon. Friend’s comments. He served as a Northern Ireland Minister and is aware of the sensitivities of issues in Northern Ireland. He is absolutely right to say that lawyers and politicians who stand up for unpopular, controversial views have every right to speak and every right to life. That is why this murder is shocking, and it is why we want to get to the truth and find out what happened.

[Mr Nigel Dodds (Belfast North) (DUP)]

I begin by welcoming the hon. Member for Gedling (Vernon Coaker) to his post as shadow Secretary of State, and I look forward to working with him. He has good experience of Northern Ireland and I am sure that we will have useful exchanges in the weeks and months ahead.

I welcome what the Secretary of State has said today in the House. The murder of Pat Finucane in my constituency was an atrocious, terrible, despicable crime. Every person involved, either in carrying out that murder or complicit in it, deserves to be brought to justice—let there be no mistake and equivalence on this issue. Does the Secretary of State accept that across Northern Ireland reasonable people on all sides agree that the idea of more costly, open-ended inquiries into such crimes is simply not reasonable, not least on the grounds of expense, but also because it has been proved that they do not bring closure and elevate certain crimes above others? He has already referred to the fact that more than 3,000 people have been murdered, 1,000 of them in the security forces. We owe it to all the victims to ensure that all murders are investigated, that their relatives are equally cherished and that there is justice for everyone. In going forward, an absolute assurance must be given for those who have died that the interests of terrorists and those who carried out terrorism are not elevated to the same status as those who protected communities and who were totally innocent.

[Mr Paterson]

I am grateful to the right hon. Gentleman for his comments and for welcoming our proposals, and I admired his wholehearted denunciation of this terrible crime. I agree with him; I think that the approach of the Historical Enquiries Team is correct. It is treating every one of these appalling deaths—3,268 deaths is a dreadful number—in an equal manner. In some cases, its attempts meet with great difficulty, as there is limited evidence—limited forensics, no DNA and so on. I admire the consistent record of satisfaction that the HET has given to the families who have received reports so far.

[Tony Baldry (Banbury) (Con)]

I commend my right hon. Friend’s selection of Sir Desmond de Silva for the task. Sir Desmond is an outstanding international lawyer. He prosecuted war crimes in Sierra Leone in very difficult circumstances, and it is worth the House recalling that he managed to indict Charles Taylor for war crimes, establishing for the first time under international law that Heads of State did not have immunity from prosecution for war crimes. Sir Desmond is a fearless lawyer. May I ask my right hon. Friend for some clarification? Will Sir Desmond be treated by the machinery of government, and by everyone involved, with the courtesy that would be extended to a High Court judge? What exactly are his powers?

[Mr Paterson]

I am grateful to my hon. Friend for his welcome of Sir Desmond’s appointment and I wholly endorse the description of him as fearless. The House perhaps does not know that as a young barrister, aged 28, Sir Desmond represented 16 individuals facing death at the gallows, and that he saw off several assassination attempts and the 16 people were acquitted. He is someone of real international integrity and repute. I did say that I would place his letter of appointment in the Library, and it is for a distinguished lawyer such as my hon. Friend to decide whether the powers are similar to those of judges or other lawyers. The Government have said that we will make available all the papers that Sir Desmond wishes to see, and I do not think that I can make a more open or clear statement than that.

[Paul Murphy (Torfaen) (Lab)]

In 2004, I announced the inquiries into the deaths of Nelson, Billy Wright and Hamill, and in September of that year I also announced an inquiry into the Pat Finucane case. It seems to me that we were under an obligation to do that because of agreements that had been held, and anything that falls short of that obviously will not get the support of the Finucane family. They did not support the idea of an inquiry under the 2005 legislation, but they certainly will not support this so-called “inquiry”. However distinguished the lawyer, it simply is not going to work. I urge the Secretary of State to think again.

[Mr Paterson]

I am grateful to the right hon. Gentleman for his question. I pay tribute, again, to his distinguished work in Northern Ireland, but I would remind him of the position that I just described to one of his successors, the right hon. Member for St Helens South and Whiston (Mr Woodward). We were facing an impasse. We fully respected what he had done and the reasons for introducing the 2005 Act, following the Saville inquiry, which was getting out of control—everyone understood that. We understood the commitment he made at Weston Park, but this was going nowhere. It is no good having a Mexican stand-off, with things going nowhere, because we want to move Northern Ireland on. This is an extraordinarily fraught and difficult case. I think that we have been very bold and courageous in making this apology—a full, frank apology to the family, given face to face with the Prime Minister of the United Kingdom in Downing street—and then working with the family to establish the truth.

[Kris Hopkins (Keighley) (Con)]

I welcome the Secretary of State’s statement and the leadership offered by the Prime Minister, as well as his bold apology. I think it is absolutely right that we do that. I offer my sympathies to the Finucane family, as I do to the 3,500 other families out there who lost loved ones in a tragic period of the history of these islands. The truth is important, but I have a school in Ilkley that needs to be rebuilt, and after the obscene amount of money that has been spent on previous inquiries, I say to the Secretary of State that I would rather see taxpayers’ money spent there than on filling the pockets of lawyers in Belfast. Does he agree with me?

[Mr Paterson]

I thank my hon. Friend for his question and pay tribute to him as someone who served in the armed forces in Northern Ireland at a very difficult time, trying to maintain the peace and to preserve law and order and democracy. He and I, as Conservatives, were elected on a platform of no more costly and open-ended inquiries and we are quite clear about that. I am more concerned, however, about the effectiveness of the inquiries. My worry, having met Mrs Finucane, is the time they take and the complication that they cause. I believe that our solution will get to the truth quicker than a public inquiry would have done.

[Mark Durkan (Foyle) (SDLP)]

We all feel for Geraldine Finucane and her family today after what they found to be a pretty insulting and insensitive experience yesterday with the let-down in Downing street. We also feel for all the victims of the troubles, many of whom still deserve truth and not just from the state. Will the Secretary of State explain how the Finucane family clearly had a different understanding or impression of what was going to be offered yesterday? Will he also explain whether the Irish Government were fully briefed as the full partners of the Weston Park commitments on what was afoot and what was to unfold? Will the Secretary of State stop patronising the family and this House by talking about a bold move to resolve an impasse, because all he has done is bypass the case for an inquiry by setting up a twilight-zone review that will not be able to compel witnesses?

[Mr Paterson]

I resent that statement. I wrote to Mrs Finucane on 28 June, three weeks after we came to power, inviting her in. Unlike my predecessor, I had a meeting with her and her son and we set out very clearly in a written statement, which the hon. Gentleman saw on 11 November 2010, the criteria against which we could make a decision. It is most unfortunate—and we were genuinely very disappointed yesterday at the reaction, because we have looked at all sorts of options and we have been working on this. We made it clear—[Interruption.] We made it clear in our statement to the House that there was a range of criteria against which we would make a decision, bearing in mind the commitments and the position of the family. We talked about delays, we mentioned the political developments that have happened since in Northern Ireland. A whole range of criteria were very clearly laid out in a transparent manner in a written ministerial statement and at no stage did we give them any misleading information about where our decision was going. There has been nothing said in public.

I am in regular contact with the Irish Government. I was in Dublin last week, where I saw the Tanaiste, and the Prime Minister spoke to the Taoiseach yesterday. I spoke to the Tanaiste twice, I spoke to the Minister for Justice and Equality and I am in regular contact with the Irish ambassador. We are in regular contact and they knew that we were getting nearer a solution, but it is an incredibly sensitive subject and we made it quite clear to everyone that we had to talk to the family first.

[Gavin Williamson (South Staffordshire) (Con)]

I welcome my right hon. Friend’s statement. Will he confirm that all the material and all the conclusions of Sir Desmond’s report will be made fully available to this House and the public regardless of how embarrassing that might be to Her Majesty’s Government?

[Mr Paterson]

I am grateful to my hon. Friend for that question. We are absolutely clear. We have been quite open about previous reports—Saville, Nelson, Billy Wright. They were uncomfortable, difficult reports but we came straight to the House of Commons as soon as we could and made a statement. We intend to do that, whatever Sir Desmond uncovers.

[Paul Goggins (Wythenshawe and Sale East) (Lab)]

As others have said, the path to peace in Northern Ireland has been based on a willingness to negotiate and to honour agreements. I regret, as others do, the fact that the Finucane family would not accept a public inquiry under the Inquiries Act, but does the Secretary of State not accept—I say this not to score points, but as a genuine supporter of the peace process in Northern Ireland—that there is a real risk that public confidence in the Government’s good faith will have been undermined by this decision and that cracking on, as he put it, is not always the best way in Northern Ireland? What I learned there was that it is never too late, and I urge him again to reconsider.

[Mr Paterson]

I thank the right hon. Gentleman for that question and give credit to him for the work he did in his years as Minister with responsibility for security in Northern Ireland. We remain in touch—we even saw each other at the Conservative party conference last week, which he might be embarrassed to have on the record—and I am sorry that he does not agree. We had a problem. It was no good saying that we had inherited the Labour position of offering an inquiry under the Inquiries Act, which the family would not accept. We had to do something. We had to look at a way of resolving the issue, as we want to move on. I made it very clear to Mrs Finucane when I met her that we wanted to find a solution. Our solution was not to carry on with the impasse but to be imaginative. As I have said, I think our solution is bold and brave. I have great confidence that Sir Desmond will get to the truth and that we will come back here in December 2012 with a very robust report that will help move Northern Ireland on. It is not satisfactory that we do not know what happened in this case.

[Several hon. Members]

rose—

[Mr Speaker]

Order. These are matters of the utmost seriousness and I very much appreciate the Secretary of State’s attempt to engage with each questioner, but may I gently point out that progress has been, to put it mildly, leisurely to date and if I am to accommodate all colleagues, which I wish to do, there is therefore a premium on brevity from Back and Front Benchers alike from now on. We will be led in this exercise by Mr Mel Stride.

[Mel Stride (Central Devon) (Con)]

Thank you, Mr Speaker. I shall indeed be brief. I welcome my right hon. Friend’s statement, not least his reiteration of the apology to the Finucane family for collusion. Will he confirm that although we will not be seeking uncosted and open inquiries in the future, sufficient resources, as deemed by Sir Desmond, will be made available to enable a full and serious review?

[Mr Paterson]

We have discussed things with Sir Desmond and we are confident that we will provide adequate resources to enable him to complete his task by December 2012.

[Dr William McCrea (South Antrim) (DUP)]

I first pay tribute to the hundreds of thousands of security forces who served in Northern Ireland with great professionalism and bravery. Last week, my family received the review summary report on the brutal murder of my loved ones, Robert and Rachel McLernon, on 7 February 1976. We are studying that at this present time. Does the Secretary of State agree with me that all innocent victims of violence—including those at Darkley, Teebane, La Mon and so on—have a right to justice rather than our yielding to the endless demands of a select few?

[Mr Paterson]

I am grateful to the hon. Gentleman for his question and I wholly endorse his comments on those who served. I have already said in previous responses that I admire the work of the Historical Enquiries Team, which treats every one of these victims the same and does its very best under difficult circumstances and sometimes, tragically, with limited evidence, to get as near as it can to the truth.

[John Healey (Wentworth and Dearne) (Lab)]

Does the Secretary of State accept that the Government might have got this badly wrong? Will he also concede today that it was a crass misjudgment to invite the Finucane family across yesterday, raising hopes and expectations, only to tell them that the pledge of a proper public inquiry had been withdrawn? So that the House can be clear about the responsibility, was the misjudged decision his or the Prime Minister’s?

[Mr Paterson]

I regret the tone of that question. Sadly, the right hon. Gentleman has completely missed the point. We came in and inherited an impasse—I do not want to vex you, Mr Speaker, by repeating this. The previous Government, whom the right hon. Gentleman supported, was going nowhere on this and we had to break the logjam. I made the approach, I met the family, I put out the written statement and I discussed this with the Prime Minister. We are a collegiate Government and we worked this out together, but it was the Prime Minister’s personal apology in Downing street that was a very bold gesture to move this on.

[Mr Speaker]

I am pleased to tell the Secretary of State that I am not vexed.

[Dr Alasdair McDonnell (Belfast South) (SDLP)]

Does the Secretary of State accept that cracking on in the wrong direction may not be the right thing to do and that this tragic case has roots that lead right back to this House and a previous Government? A Home Office Minister in this House pointed the finger at lawyers a few days before Pat Finucane was murdered and that was sufficient endorsement for a few people—elements in the police and security forces—to send out lunatics in the loyalist paramilitaries to plan the murder of three lawyers, two of whom, now deceased, were friends of mine. The dogs in the street knew this at the time. In doing that, disrepute was brought on hon. Members across the House and those elsewhere who were members of the security forces and of the Royal Ulster Constabulary.

We now accept that there was collusion. May I ask the Secretary of State whether the proposed review will confine itself to the narrow details of the murder of Pat Finucane, or will it include investigations into the wider collusion and plotting to kill those other lawyers? Does he know of the destruction of any papers? He will be aware that papers are brought in. I am concerned that Sir Desmond, who is a very honourable and highly reputable man, does not have the power to summon people and papers; his teeth have been removed and many of the papers have been taken out.

[Mr Paterson]

I am not sure whether the hon. Gentleman was present when I read out the terms of reference, but they are very clear that the review is to draw on the extensive investigations that have already taken place—I have listed the organisations—into the murder of Pat Finucane. That is quite clear.

[Mr Tom Watson (West Bromwich East) (Lab)]

The former intelligence officer and private investigator Philip Campbell Smith has admitted to hacking the computer of another intelligence officer on behalf of Alex Marunchak of News International. Campbell Smith was arrested for witness intimidation of the very same intelligence officer, who was supposedly the only officer from the intelligence community co-operating with the Stevens inquiry into the death of Pat Finucane. It is alleged that when he was interviewed by the police he admitted that a special branch officer working on the Stevens investigation gave that personal information. I welcome the Secretary of State’s commitment to allowing Sir Desmond access, presumably, to the police statement that was given, but if Sir Desmond wants to interview that special branch officer and that officer refuses, what powers will Sir Desmond have to get to the truth?

[Mr Paterson]

I am grateful for that question, and the hon. Gentleman has made some interesting comments. These are issues for Sir Desmond to resolve, but we believe that he will find the truth in the 9,000 statements taken under caution. We should not be under any illusion that some of the previous public inquiries got all witnesses to come forward. Indeed, the hon. Member for North Antrim (Ian Paisley) did not turn up to an inquiry and was fined £5,000 because, on a point of principle, he did not want to give information. We need to get away from the idea that a public inquiry will always bring witnesses forward and will always be more effective. We have 9,000 witness statements and 1 million pages to investigate as a route to the truth. I think that is a quicker way of doing things.

[Mr Gregory Campbell (East Londonderry) (DUP)]

I welcome the Secretary of State’s statement and his recommitment to recognising the dedication and bravery of the security forces, 99.9% of whom have obeyed, kept and upheld the law. Nothing that is said today should sully the names of those people. Does the Secretary of State understand that in Northern Ireland the track record of public inquiries is not perceived as good? Even where Governments have indicated that inquiries should not be expensive, they have been, and where Governments have said that they should bring closure, they have not brought closure. Does he accept that today’s statement and announcement should mean that we start spending scarce resources on the future rather than wasting them on the past?

[Mr Paterson]

I am grateful to the hon. Gentleman for his comments. We were quite clear before, during and after the election that we believe there should not be any more costly and open-ended inquiries. We believe this is a swifter and better route and I agree that if we can resolve some of these outstanding issues—I have gone on about the impasse—we can all begin to address problems of the present and the future. That is what we are trying to do.

[Mr David Winnick (Walsall North) (Lab)]

All the atrocities committed were condemned at the time, during the 1980s and 1990s, and there was no selective condemnation. Whatever the sources of the murders, they were condemned by both sides of the House. However, will the Secretary of State recognise that this case is different, because of the extent of collusion by the state, and that the integrity of the state itself is in question. Bearing in mind that there have been two previous one-person inquiries—by Stevens and Judge Cory—that have not reached a satisfactory conclusion, is it not understandable that the family who have fought so hard for justice are so disappointed by the decision that has been reached?

[Mr Paterson]

Again, I say that we accept the verdict of Stevens that there was collusion and we have apologised. What we have set out today is a swift route to the truth.

[Sammy Wilson (East Antrim) (DUP)]

May I welcome the Secretary of State’s statement and express my disappointment that the anger that has been expressed by the family is being used to indicate that the peace process in Northern Ireland is so fragile that it will somehow fall apart as a result of the disappointment of one family? The Secretary of State has given us details about the inquiry, but will he also tell us the cost of the inquiry so far and give us an assurance that this marks a permanent end to the expensive public inquiry process of dealing with the past, which has done nothing to heal wounds but has filled the wallets of lawyers?

[Mr Paterson]

I thank the hon. Gentleman for his support. This is not an inquiry—it is a review—and I appointed Sir Desmond only this morning. To repeat, we estimate the cost to be £1.5 million. I entirely endorse the hon. Gentleman’s opinion that we need to move on. Let me pick up on an earlier comment. A few weeks ago, I was in Enniskillen, where I met about 100 young people who were asked their three priorities. Not one of them mentioned the past. I think there is a generational issue here. For those affected—the 3,268 people and any of their relatives and for the Finucane family—these events are absolutely, shatteringly appalling. Their whole adult lives have been dominated by them and we have to recognise that, but there is a new generation coming through and we have to think about them. That is why we have to resolve these outstanding issues and move on.

[John McDonnell (Hayes and Harlington) (Lab)]

Soon after I was elected in 1997, I led an Adjournment debate on the Finucane case and I do not doubt the Minister’s wish to move on. However, one thing I learned in that debate and afterwards was that unless the family sanctions the process of moving on, this will be a futile exercise. No one doubts the abilities of Sir Desmond de Silva, but, as has been pointed out, he will not have the legally enforceable right either to access papers or to demand the appearance of witnesses. I believe that unless the process has the family’s approval it will be tainted from the outset. The family was shocked yesterday. May I ask the Minister, before he takes the next step, to take a pause to allow the family to consider its position, come back and enter into more dialogue with the Government before we blunder into yet another mistake?

[Mr Paterson]

I am sorry that the hon. Gentleman takes that attitude. I do not want to repeat myself too often, but we inherited an impasse. The solution proposed by his Government was going nowhere; indeed, it was not a solution and this was festering. We fully appreciate the horror of this murder and the international significance of it. We honestly believe that getting the Prime Minister to invite the family over and meet them in person was a bold, brave move, and we sincerely believe that the appointment of this international lawyer of impeccable integrity will get to the truth faster than would have happened under a statutory inquiry, which the family would not have accepted.

[Mr David Anderson (Blaydon) (Lab)]

It seems strange for the Secretary of State to say that the truth lies in the archives. It would then have lain in the archives for over 22 years; if the truth is there, why is someone not already in jail? Witnesses need to be called in a proper way, and that could happen only through a public inquiry. Clearly, this is more about the Conservative party looking to its manifesto and saving money than about justice being done.

[Mr Paterson]

I regret the tone of that contribution, which reduces the level of our debate, and I wholly reject what the hon. Gentleman says. I believe that the Prime Minister took a bold step. I think that the hon. Gentleman’s views will be refuted in December 2012.

[Ian Mearns (Gateshead) (Lab)]

The Secretary of State said that his party was elected on a platform of no more expensive or open-ended inquiries, but I am not convinced that the coalition came into government with that stance. I welcome the fact that the Prime Minister has apologised for state collusion in the murder of Pat Finucane, but I was a bit disconcerted when the Secretary of State said in his statement that collusion was not itself a criminal offence. Representatives of the state have acted criminally; a criminal investigation should ensue. Prosecution of those complicit in the murder of Pat Finucane should come after that. May we have some guarantees that that will take place?

[Mr Paterson]

I am sure that the hon. Gentleman understands that the Director of Public Prosecutions is, and should remain, wholly independent of Government. The previous DPP found that some cases did not achieve the necessary threshold. Obviously, should Sir Desmond reveal evidence in his report, in line with the independence vested in him, it will be entirely for the DPP to investigate and pursue it.

Points of Order

Wednesday 12th October 2011 Commons Chamber

13:31

[John McDonnell (Hayes and Harlington) (Lab)]

On a point of order, Mr Speaker. Last week, the BBC announced 2,000 job cuts. That is a direct result of the licence fee imposed on it by the Government. We were expecting some form of ministerial statement on the subject—at least a written one, if not an oral one. Have you had any indication from the Government that a Minister will come before the House to give some form of statement on the subject?

[Mr Speaker]

I have not, but I have a feeling that the hon. Gentleman will, very properly, return to the matter, possibly at business questions tomorrow, but if not, in another way, and pretty soon.

[Rosie Cooper (West Lancashire) (Lab)]

On a point of order, Mr Speaker. Yesterday at the Health Committee, in response to a question of mine, the Secretary of State told us:

“I’m not aware—my colleagues may be—where trusts are seeking to manage their costs by downgrading of existing staff. If you are aware of that, please, by all means, tell us but I’m not aware of it.”

Today a statement has been issued by Janet Davies, executive director of nursing at the Royal College of Nursing, which says that

“the Royal College of Nursing has raised the issue of downbanding with the Secretary of State on a number of occasions, alongside other concerns such as recruitment freezes and redundancies in the NHS.”

Mr Speaker, have you had any indication that a written statement, or perhaps a formal apology, will be forthcoming from the Secretary of State?

[Mr Speaker]

The short answer is that I am aware of neither, but I am grateful to the hon. Lady for her point of order and advance notice of her intention to raise it. The issue, in so far as we are talking about appearances before a Committee, is a matter for the Committee rather than the Chair, unless and until the Committee draws the matter to the attention of the House. Meanwhile, the hon. Lady has registered her concerns forcefully on the record.

United Kingdom Bioethanol Industry

Wednesday 12th October 2011 Commons Chamber

Motion for leave to bring in a Bill (Standing Order No. 23)

13:33

[Ian Swales (Redcar) (LD)]

I beg to move,

That leave be given to bring in a Bill to require the Chancellor of the Exchequer to lay before Parliament an independent report on methods for supporting the domestic bioethanol production industry; and for connected purposes.

The Prime Minister said last week:

“Whatever it takes to help our businesses…we’ll do it.”

Well, now is his chance. The UK bioethanol industry has invested more than £500 million over the past five years, and a lot more is planned. That is based on the UK’s commitment to implementing the EU renewable energy directive and having biofuel content in our petrol.

Ensus has built Europe’s largest bioethanol refinery in my constituency, and it started up in February 2010. More investment is planned in the constituencies of the hon. Members for Great Grimsby (Austin Mitchell) and for Brigg and Goole (Andrew Percy). However, the Ensus plant came offline at the end of May and remains shut. The situation is uncertain. The jobs of 2,000 people at the plant and in the supply chain are at risk. This is not a tale of commercial gross misjudgement; it is mostly a tale of being let down by politicians. Sadly, it is a common story. Instead of leading the world in green technology, we are way behind and playing catch-up, but other countries are moving even faster. In 2010, we slipped from third to 10th in the world green investment league.

So what are the problems affecting the bioethanol industry? First, the previous Government repeatedly delayed and watered down the renewable transport fuel obligation. They had form, with similar dithering bankrupting the early investors in biodiesel production. The original 2003 target was 8.8% by 2010-11. The target now is 5%, which will not be reached until 2013-14, so there has been major delay. That has radically moved the goalposts for an industry that has a long lead time for investments coming on stream.

Secondly, there are issues to do with UK fiscal policy, which actually discriminates against biofuels. Those fuels are, by their nature, energy products, but they are taxed by volume at the same rate as the fossil fuels that they are intended to replace. As biofuels have a lower energy content by volume, they face a heavier tax burden despite being the greener option. That is hindering the uptake of biofuels in the UK.

The EU Commission has announced proposals to revise the energy taxation directive, which are now being negotiated by the European Council. Under the revised directive, transport fuels would be taxed, at the minimum level, according to energy content and carbon content, rather than by volume. The UK should support the adoption of the revisions to the directive at EU level and reform UK fiscal policy. Transport fuels with the best carbon and sustainability performance should be available to the consumer at the pump at the lowest cost, in terms of pence per mile.

Thirdly, there are US imports. The UK market is dominated by US imports, which exploit loopholes in our tariff structure and receive domestic subsidies for their production. Bioethanol used for blending with petrol in transport fuel is imported to the UK already partly blended. It is then classified as a chemical product and dealt with under chapter 38 of the UK trade tariff. The customs duty payable is much lower than it ought to be, especially when comparison is made with many other EU member states. Bioethanol imported under that code is able to undercut the market, with damaging consequences for our industry. Many other EU states such as Germany have ensured that only unadulterated ethanol qualifies towards their targets under their renewable transport fuel obligation. That is imported under the equivalent of chapter 22 of the UK trade tariff classification, which carries a much higher tariff. Through that method, they shield their domestic market from the aggressive and unfair import of bioethanol that we experience here.

It is clear that the tariffs present a major problem for the industry. A new operator, Vireol, claims that it has already missed out on a significant multi-million-pound equity investment from a major industry player because of our approach to tariffs, as compared with the approach taken by competing member states. It sees our stance as a serious impediment to the development of a thriving industry in the United Kingdom.

There is a vote on the issue today in Brussels. It beggars belief that only last week a Department for Transport official seriously suggested that the UK should vote against our long-term national interest based on a short-term, tactical, economic assessment. That would mean supporting the US in undermining our industry, based on its subsidised material, which is chemically doctored to exploit a tariff loophole. We need real strategic thinking.

One final issue: the Department of Energy and Climate Change is not always clear about sustainability criteria. Some products are less green than others, and investors need clarity on that vital policy issue. There is a serious lack of joined-up thinking across government when it comes to green technology. The issues are very likely to involve the Department of Energy and Climate Change, the Department for Business, Innovation and Skills, and the Treasury. They will sometimes involve the Department for Environment, Food and Rural Affairs, and in this case they involve the Department for Transport.

I welcome the recent formation of the green technology council to address the problem of co-ordination. Here is what the Government need to do: I want the green technology council to look urgently at the bioethanol situation. Using this example, it should formulate how to get all Departments and the civil service joined up, fighting together ruthlessly for the national interest as we forge our green future. I want to see the Department for Transport implement the renewable transport fuel obligation as soon as possible and in a predictable way to give the industry the market that it plans for when making major investment decisions. I want to see the Treasury tax biofuels by energy or carbon content, not by volume, and I want to see the UK take action on US imports, get them properly classified and stop this material being dumped here.

There may be those listening to this debate who question the sustainability of the business. To them let me say that the Ensus business is an outstanding example of sustainability. The feedstock is animal feed wheat. The products are bioethanol for use in road fuel, carbon dioxide which, in a separate £20 million investment by another company, is collected for use in the food and drink industry, and animal feed which contains all the protein in the original wheat. It is highly valued by farmers and replaces the import of high protein soya-based animal feed from South America, which is most likely grown on former rain forest land. Those who worry about land use should remember that under the crazy common agricultural policy we are currently paying our farmers not to grow things.

The National Farmers Union has commented on the situation in a letter to the Secretary of State for Transport, saying that

“the NFU has been made acutely aware of the current damage being created to the development of the UK biofuels industry from ethanol imports which can exploit loopholes in the tariffs structure and classification definitions, undermining sustainably produced domestic biofuels.”

The NFU goes on to point out that damage to the industry will have

“additional implications for UK agriculture; reducing market diversity which supports our farm investment, agricultural jobs and rural development while additionally putting at risk availability of useful by-products such as protein for livestock feeds, continuing our increasing reliance on imported products.”

This is an excellent business to have in the UK. Our feed wheat yields are some of the highest anywhere in Europe and the high starch varieties typically grown in the UK are ideally suited—[Interruption.]

[Madam Deputy Speaker (Dawn Primarolo)]

Order. I am sorry to interrupt the hon. Gentleman, but there are far too many private conversations going on in the Chamber. The hon. Gentleman has the Floor for his ten-minute rule Bill. Conversations should go on outside the Chamber.

[Ian Swales]

This is an excellent business to have in the UK. The wheat grown here is ideal for producing bioethanol. We can have a more efficient and cost-effective business than that of Germany, France or Belgium, yet we are significantly lagging behind those countries. The UK has a proud record in process industries and bioethanol should be a key part of our industrial future.

There are many benefits to taking action. A thriving bioethanol industry will help us meet our climate change targets. Energy security will be improved by literally growing our own. Action will encourage further investment in green manufacturing and technology development. There are already other exciting possibilities, above all growth. When fully running Ensus has a turnover of around £250 million. To supply future UK needs there is a £3 billion business out there.

The Bill should be seen as part of the Government’s vital growth agenda and requires that the Chancellor lay before the House a report on the industry. It should cover the specific tax and tariff issues mentioned earlier in my speech, how to encourage further rapid investment in this green industry so that the UK can match the activity of its competitors, and how to ensure that the UK Government and civil service are properly lined up in support. The Government now have a golden opportunity to show that they are serious about their commitments to being green, to promoting manufacturing and, above all, to growth. We should be supporting our jobs, supporting our growth and supporting our bioethanol industry.

Question put and agreed to.

Ordered,

That Ian Swales, Tristram Hunt, Andrew Percy, Austin Mitchell and Mr David Ward present the Bill.

Ian Swales accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 20 January 2012, and to be printed (Bill 233).

Opposition Day

Wednesday 12th October 2011 Commons Chamber

(Un-allotted Day)

Jobs and Growth

Wednesday 12th October 2011 Commons Chamber

13:45

[Ed Balls (Morley and Outwood) (Lab/Co-op)]

I beg to move,

That this House notes that there has been no growth in the UK economy over the last nine months, compared to 1.8 per cent. growth in the previous nine months; further notes that families are feeling the squeeze, unemployment is rising again and the recovery was choked off last autumn, well before the eurozone crisis of recent months; agrees with the International Monetary Fund’s managing director that ‘growth is necessary for fiscal credibility’ and the IMF’s recent report which warned that ‘if activity were to undershoot current expectations and risk a period of stagnation’ the Government should ‘consider delaying some of their planned consolidation’; further notes that borrowing is forecast to be £46 billion higher than planned because of the slower growth and higher unemployment arising from the Government’s policy of cutting spending and raising taxes too far and too fast; further believes that the Government need a plan for jobs and growth if the deficit is to be reduced in a sustainable way; and calls on the Government to implement a steadier deficit plan and the Opposition’s five point plan for jobs, which includes a tax on bank bonuses to fund 100,000 jobs for young people, bringing forward long-term investment projects, reversing temporarily the VAT increase to provide an average £450 increase for a couple with children, implementing a one-year cut in VAT on home improvements, repairs and maintenance to five per cent, and a one-year national insurance tax break for small firms taking on extra workers.

In opening this Opposition debate on the economy and moving our motion urging the Government to kick-start Britain’s choked-off recovery and adopt Labour’s five-point plan for jobs and growth, I shall start by setting out the facts for the House and for the country. Over the past year the British economy has ground to a complete halt. The latest figures show no growth at all since last autumn. Consumer and business confidence has slumped. For three months manufacturing output has been falling. More than 16,000 companies have gone out of business. Employment is falling and today’s chilling news is that unemployment has risen by 114,000 in the past three months alone.

Unemployment here in Britain now stands at 2.57 million people out of work—the highest level since 1994. Unemployment is rising across the country. We have the highest level of unemployment among women since 1988. Most worryingly of all, youth unemployment, which a year ago was falling, is now rising again, up 74,000 in the past three months, with 991,000—more than one in five—young people out of work. There has been a 60% rise in youth long-term unemployment since February, and the overall level of youth long-term unemployment is at its highest for 19 years. What a waste of talent, what a waste of money and what a betrayal of this young generation.

[Michael Fallon (Sevenoaks) (Con)]

The former Home Secretary, Charles Clarke, said yesterday:

“I think the economic proposition that Labour puts at the moment is unconvincing.”

How can the right hon. Member for Morley and Outwood (Ed Balls) convince the House and the country when he cannot convince his former Cabinet colleague?

[Ed Balls]

Unemployment is rising and growth is flatlining. The Prime Minister said just a few months ago that the only person supporting me was The Guardian leader writer. Since then, what have we seen? The OECD and the International Monetary Fund are saying that the Government should change course. What has happened to The Guardian leader writer? He has become the speech writer to the Prime Minister.

To those who say that these are just the effects of a world economic crisis now hitting Britain—the same people who absurdly claim that the global financial crisis was all the fault of the British Labour Government, but who now want to blame the British growth crisis on the rest of the world—I say yes—

[Christopher Pincher (Tamworth) (Con)]

Will the right hon. Gentleman give way?

[Ed Balls]

In a minute.

Yes, the deepening euro crisis and the weaker US recovery have made things harder for British exporters in the past three months, but one cannot blame the eurozone or the world economy for the collapse of economic recovery here in Britain when, since last autumn, our economy has grown more slowly than that of any EU country except Greece and Portugal, when we have the highest level of inflation of any EU country except Estonia and Latvia, and when, over the past year, we have seen a bigger rise in unemployment than the EU average, when most EU countries have seen unemployment not rising, but falling. I know the Chancellor does not like it, but those are the facts. The Prime Minister said today, “I accept responsibility for everything that happens in our economy”. I hope the Chancellor will do the same today.

[Mr William Cash (Stone) (Con)]

Does the right hon. Gentleman accept that the trade deficit between ourselves and the 17 countries in the eurozone has gone up from minus £4 billion to minus £38 billion in the past year alone, and that one of the main reasons, both as respects the whole of Europe and as respects the United Kingdom, is that employment and social regulations are strangling small businesses, for which the Labour party was also responsible in Government? I am critical of the present Government, but am I not also critical of the right hon. Gentleman’s party’s performance in the past 10 years?

[Ed Balls]

The Chancellor’s big boast over the past six months, which we were told regularly, was that between 400,000 and 500,000 more jobs had been created in the British economy, but today’s figures months show that employment has not gone up at all in the past 12 months; it has actually gone down. We were also told that public sector job cuts would be more than outweighed by the rise in private sector jobs, but I am afraid that employment is falling because the private sector has been unable to deliver the recovery we were promised. It has been a complete fantasy.

[Christopher Pincher]

It is nice that the shadow Chancellor acknowledges the Government’s responsibility for the economy, but it would also be nice if he took some responsibility for the damage he did to it when he was in power. A former Chancellor has said that Labour lacks economic credibility. If the right hon. Gentleman cannot even convince a former Chancellor on his own Back Benches, how can he convince the country?

[Ed Balls]

The hon. Gentleman will have to convince his constituents because, despite the fact that we were told a year ago that the recovery would be on track, growth has flatlined for a year and unemployment is rising right across the country, which means that borrowing will be higher, not lower.

[Charlie Elphicke (Dover) (Con)]

The shadow Chancellor responds to questions about his failing to convince his shadow Cabinet colleagues and former Cabinet colleagues by talking about convincing constituents, so why have his poll ratings for economic credibility fallen among his constituents and my constituents and across the whole country?

[Ed Balls]

I would be happy to have a debate with the hon. Gentleman on economic credibility. He said in June this year:

“Employment has gone up in my constituency and unemployment has been falling, which is welcome.”—[Official Report, 22 June 2011; Vol. 530, c. 426.]

The figures show that unemployment in his constituency has gone up by 456 in the past year. Perhaps he should apologise to his constituents for getting it wrong.

[Several hon. Members]

rose—

[Ed Balls]

I will make some progress before giving way again. A year ago we warned that a global hurricane was brewing and that it was exactly the wrong time to rip out the foundations of the house here in Britain.

[Mr Dave Watts (St Helens North) (Lab)]

Will the shadow Chancellor name one country that has managed to get out of recession without growth?

[Ed Balls]

By definition, it is impossible to get out of recession without growth, which is why in the past nine months we have seen no growth at all. We were told we were out of the danger zone, but we do not hear that very often now.

[Several hon. Members]

rose—

[Ed Balls]

I will make some progress before giving way again. I am always very happy to take interventions. It is clear that the Chancellor has a good whipping operation in place today, although good whipping is something he knows quite a lot about.

A year ago, we warned that a global hurricane was brewing and that it was exactly the wrong time to rip out the foundations of the house but the Chancellor disagreed and recklessly decided to raise taxes and cut spending further and faster than in any other economy. The evidence is clear that his plan has not made the British economy better able to withstand the global storm and that by going too far and too fast he has left it badly exposed. Families and businesses up and down the country are asking how many more businesses must go bankrupt, how many more families must see their living standards fall, how many more young people will have to lose their jobs, how much more unemployment and misery and rising child poverty must we see. How much more evidence do the Government need before they finally change course?

[Jacob Rees-Mogg (North East Somerset) (Con)]

Will the right hon. Gentleman give way?

[Ed Balls]

I will happily give way to my friend over there.

[Jacob Rees-Mogg]

I am grateful to the shadow Chancellor for giving way, but I wonder whether he has got it the wrong way round. With a global storm brewing, the right thing to do was ensure that the gilt market was secure and that we could carry on borrowing cheaply, which has ensured that a recovery will eventually come. He can no doubt find something I said in 1830 and quote it back to me, but that is not really the point.

[Ed Balls]

I am not sure about 1830, but if the hon. Gentleman was in the House in 1930—he might have been—he will know the dangers of very low bond yields accompanied by rising national debt, rising unemployment and economies locked in stagnation. I do not know whether he was around at the time, but some forefathers and foremothers certainly were. Let me quote the director of the National Institute of Economic and Social Research, the think-tank of the year, who said:

“The reason people are marking down the gilt yields is because they think that the economy is weak.”

That is the truth.

Let me make a prediction. I do not expect the Chancellor to announce a change of course today, but will we hear him repeat his boast made this time last year that the British economy’s recovery is on track? I doubt it. Will he repeat the Prime Minister’s deeply complacent boast that Britain is out of the danger zone? I doubt that, too. Will he describe Britain as a safe haven that is immune from the global storm? Will he repeat his naive forecast that cutting public jobs will boost private confidence and create more private jobs? Even this Chancellor cannot fly in the face of the facts. Employment has fallen in the past 12 months. On the day when unemployment has risen again, will he give any indication that he understands at all how hard things are for families up and down the country? Is he so out of touch that he really believes that a £1.40 a week council tax freeze can compensate for a £9 a week rise in VAT?

[Nadhim Zahawi (Stratford-on-Avon) (Con)]

On unemployment in manufacturing, why does the shadow Chancellor think that manufacturing was 21% of GDP in 1997 and 12% when Labour left office?

[Ed Balls]

Well, unemployment has fallen as a percentage—[Interruption.] As I said, that whipping operation knows no bounds. I was hoping that the hon. Gentleman was going to repeat what the hon. Member for West Suffolk (Matthew Hancock) said earlier this year. He said that

“manufacturing is expanding under this Government”.—[Official Report, 23 March 2011; Vol. 525, c. 1024.]

The trouble is that manufacturing output has fallen in every one of the past three—[Interruption.] I am going to agree with the hon. Member for Stratford-on-Avon (Nadhim Zahawi), who wrote on his blog that

“deficit reduction alone isn’t enough. If we are to smooth the waters of this choppy recovery we need to ensure that we also support sustainable growth in the private sector.”

Where is that growth? Will the Chancellor repeat his claim that—

[Sir Peter Tapsell (Louth and Horncastle) (Con)]

Will the right hon. Gentleman give way?

[Ed Balls]

Undoubtedly.

[Sir Peter Tapsell]

As a lifelong Keynesian, I fully understand that growth can be achieved only by increased demand. Every Finance Minister in the western world is grappling with that problem. What are the right hon. Gentleman’s proposals for increasing demand without causing damaging side-effects for the rest of the economy?

[Ed Balls]

At last, a perceptive intervention from the right hon. Gentleman. I will come to that very issue later in my speech after making a few more points. I will deal with ensuring that getting demand moving is done in a safe, sustainable and careful way.

[Geraint Davies (Swansea West) (Lab/Co-op)]

Does my right hon. Friend agree that it is no surprise that, if the Chancellor announces half a million job cuts in the public sector, those people will save rather than spend and that the people in the private sector, who normally sell things to them, contract and stop taking people on? It is no surprise that that very announcement underpins the lack of growth in our economy and puts the guilt on the Government side of the Chamber.

[Ed Balls]

I think that the Chancellor will regret talking down the British economy a year ago, because the rise in private sector jobs has been swamped by public sector job cuts. That is why employment is falling. That is why the private sector is not investing. That is why his corporation tax cut has had no impact on private sector investment. Will he repeat his claim made in January 2009 that

“quantitative easing is the last resort of desperate governments when all their other policies have failed”?

Those are prescient words, because we know the truth, and so do his increasingly desperate-looking supporters on the Government Benches.

Let me say what the Chancellor cannot admit: the private sector-led recovery he promised has proved to be a fantasy, as we predicted. In the past year, the growth that he predicted has failed to materialise.

[Sajid Javid (Bromsgrove) (Con)]

Will the right hon. Gentleman give way?

[Ed Balls]

In a moment.

Unemployment is rising, and a vicious cycle of higher unemployment, fewer people in work paying tax and more people on benefit means that the Chancellor’s deficit reduction plan is going badly off track. We all know the truth, and so does he—plan A has failed.

[Sajid Javid]

Can the right hon. Gentleman name one country that has got out of a debt crisis by taking on more debt?

[Ed Balls]

I understand the hon. Gentleman’s point. If, rather than preparing his intervention, he had listened to my last point, he would have understood why borrowing is already set to be £46 billion higher than the Chancellor planned. The reason is that if unemployment goes up, if the economy flatlines, if fewer people are paying tax and if more people are on benefits, you borrow more. In the hon. Gentleman’s constituency, 50 more people are unemployed than a year ago. Perhaps he should be apologising for backing a Chancellor who got it so badly wrong.

This increasingly desperate Chancellor is now relying on plan B—or should I say plan BOE? But quantitative easing cannot work on its own, and any sensible economist can tell him why that is. The new shadow Chief Secretary to the Treasury, my hon. Friend the Member for Leeds West (Rachel Reeves), who is a former Bank of England economist, can certainly explain to the Chancellor why quantitative easing cannot do the job on its own. Whether the current Chief Secretary—the former national parks press officer—could explain to the Chancellor how quantitative easing works is another question. As the shadow Chief Secretary could very well explain—[Interruption.] Does the hon. Member for West Suffolk (Matthew Hancock) want to intervene? If so, I will happily take his intervention.

[Matthew Hancock (West Suffolk) (Con)]

As a former Bank of England economist, may I explain to the shadow Chancellor that quantitative easing works only when one has a credible fiscal policy?

[Ed Balls]

I am so pleased that the hon. Gentleman has made his intervention, because we have missed him for the past couple of debates, and now he is back. Last time he intervened on me, he put this on his website:

“Shadow Chancellor boosts Matthew’s work in West Suffolk”.

I want to do the same again. His campaigns to get more money for schools, to keep Thetford forest safe and to stop cuts to school crossing patrols are going well. The chief executive of his council has been sacked, and the Labour council in Ipswich has intervened and backed his campaign on school crossing controls and libraries. I have a quote from the shadow Chancellor for his press release: “Mr Hancock has been tireless in his campaign against unfair cuts to local services imposed by the Conservative-led Government—cuts which go too far and too fast.” He can leave the last bit out if he likes; I do not mind.

[Matthew Hancock]

rose—

[Ed Balls]

I will give way, but before I do, let me return to quantitative easing. As these Bank of England economists know well, simply printing money cannot boost demand and keep interest rates low when they are already close to zero. Printing money cannot boost spending when companies are too scared to invest and consumers to spend. QE—the hon. Gentleman should know this—cannot revive a stalling economy by boosting demand in one direction when fiscal policy is working in a contractionary way in completely the opposite direction. As the Bank of England Governor said only last week, and in this respect I agree with him:

“We can do our part in it but we can’t solve all our problems alone.”

I now give way to the hon. Gentleman.

[Matthew Hancock]

The shadow Chancellor is famous for being a supporter of Norwich City football club, so will he join me in welcoming the decision to break ground on dualling the A11—an investment project that did not get the go-ahead under Labour and is happening under this Conservative Government?

[Ed Balls]

I think the hon. Gentleman got the name wrong. He does not mean Norwich City—he means premiership Norwich City, which is more than one can say for any football team in Suffolk. I will back his campaigns to stop the cuts and to spend more, and I fully support the dualling of the A11. At last some Conservatives have persuaded some Conservative councils to do the right thing about these proposals, which is very good.

[Richard Fuller (Bedford) (Con)]

It is all very humorous here today, but in my constituency we already have above-average national levels of unemployment and unemployment has increased. It is always interesting to hear an economist debate with another economist. However, may I ask the shadow Chancellor what direct personal experience he has of working in business, helping to create jobs, and knowing what it is like to make payroll each week? If he does not have any of that experience, will he please undertake to this House that he will go out and get some?

[Ed Balls]

I have worked in Government and at the Financial Times. I have never run a business, but I respect people who run businesses and I understand why they are so worried at the moment. In the hon. Gentleman’s constituency, where unemployment has gone up by over 400 in the past 12 months, there will be some very worried businesses, and it is important that we listen to them and hear what they are saying.

That is why now is the time for our oh-so-political Chancellor to put politics aside and start to do the right thing. Protecting our economy and protecting valuable businesses and jobs is more important than trying to protect a failed plain. We do not have to wait for another month of unemployment rising, or for 46 more days until we finally get the economic and fiscal forecast from the Chancellor, to know what he is going to have to say. He is going to have to downgrade his growth forecast for this year for the fourth time in 18 months and downgrade his growth forecast for next year. As I have explained, we already have £46 billion more borrowing in the pipeline, and unemployment is now rising. He is going to have to admit that borrowing will be billions higher still than at the time of his last forecast. The Prime Minister says:

“You can’t borrow your way out of a debt crisis”,

but he just doesn’t get it. [Interruption.] No, he doesn’t get it. Because with growth flatlining, and with today’s bleak news of rising unemployment, the Chancellor’s failing plan is leading to not lower borrowing but higher borrowing than he planned.

[John Hemming (Birmingham, Yardley) (LD)]

Whatever the Government’s policy, the Opposition’s policy is to borrow more to increase demand. Is there a limit on the borrowing?

[Ed Balls]

I will return to the hon. Gentleman and his party in a moment. They gave the Government some very good advice 18 months ago, but unfortunately it was not heeded.

[Elizabeth Truss (South West Norfolk) (Con)]

The right hon. Gentleman has talked about infrastructure and the A11. Labour cancelled the road-building programme, whereas we are breaking new ground on the A11. In addition, so much red tape was put in place that we are now 83rd in the world for regulation. Does he think that is helping small businesses in our country?

[Ed Balls]

To be fair to the hon. Lady, she is half on message, as she was back in January when she called for national police cuts, but not in Norfolk. That is little better than her neighbour over the border, the hon. Member for West Suffolk. I am in favour of the dualling of the A11. I personally wish we had done that, given that we did a lot of road-building and investment, but for some reason Norwich City season ticket holders did not have a strong enough voice in this House. Perhaps Mr Charles Clarke is to blame.

[Gavin Shuker (Luton South) (Lab/Co-op)]

Is my right hon. Friend as outraged as I am by the series of east of England Tory and Liberal Democrat MPs who choose to ignore the massive cuts to programmes such as Building Schools for the Future, which would have rebuilt schools in their own areas?

[Ed Balls]

My hon. Friend is being unfair. The hon. Member for West Suffolk campaigned to reverse the cuts in Building Schools for the Future, as we know. To be fair to the hon. Member for South West Norfolk (Elizabeth Truss), she has campaigned for fewer cuts in Norfolk. If only she did not take such a regional view.

[John Mann (Bassetlaw) (Lab)]

I congratulate the shadow Chancellor on listening to what I said in this place a year ago and on the major change in Labour’s economic policy in the last three weeks, which has gone unnoticed. Last year’s policy of a permanent reduction in VAT has changed to the far more credible policy of a temporary reduction in VAT, which is precisely what I argued for in this place a year ago. Will the shadow Chancellor listen carefully if I have the chance to make a point about national insurance in this debate?

[Ed Balls]

My hon. Friend is a leading indicator, not a lagging indicator.

The fact is that the deficit plan is going too far and too fast. As I have said, we should stop putting party political advantage before the national interest. That is why the right thing to do to help struggling families and businesses in the constituencies of Members across the House is to adopt a plan now to get our deficit down by getting our economy moving. We should repeat the bank bonus tax; build 25,000 homes; guarantee a job for 100,000 young people; genuinely bring forward long-term investment projects in schools, transport and roads; temporarily reverse the damaging rise in VAT, which would mean £450 for a couple with children; have an immediate one-year cut in VAT to 5% on home improvement, repairs and maintenance; and introduce a one-year national insurance tax break for every small firm that takes on extra workers.

The Chancellor does not have to wait 46 days. He can bring forward emergency resolutions in this House next week and we will support them. He can call the plan what he likes. If he wants to appease The Spectator, he can call it plan A-plus. That is fine by us. Britain just needs a plan that works for jobs and growth, which is why he should adopt Labour’s five-point plan for jobs and growth.

[Jesse Norman (Hereford and South Herefordshire) (Con)]

While we are on the topic of football, may I congratulate the right hon. Gentleman on his ample use of the substitutes’ bench, although it was of course not him who used the substitutes’ bench? What would be the cost of his temporary cut in VAT, how does he propose to finance it, and what would be the gain in GDP growth as a result?

[Ed Balls]

“Jesse is the Clark Kent of British politics.” Unfortunately, that was said by the other candidate for the leadership of the Conservative party, Boris Johnson. What an endorsement for the hon. Gentleman to have on his own website! The fact is that the deficit reduction plan is going too far—

[Jesse Norman]

rose—

[Ed Balls]

Get back in your phone box, I am answering the question. We need a slower pace of deficit reduction, not the £40 billion more that the Chancellor boasted of. An injection now to get the economy growing and unemployment coming down is the best way to get our deficit down. People do not have to take it from me; that is what the IMF and the OECD are advising the Chancellor to do. They say, “If the economy gets into sustained contraction, slow down the pace of consolidation.” I will give the hon. Gentleman another go.

[Jesse Norman]

We are all enjoying the shadow Chancellor’s vaudeville act, but he has failed to answer the question. I am interested in what would be the actual cost of the VAT cut that he proposes and how he would fund it.

[Ed Balls]

The hon. Gentleman would know the answer if he listened. I said that attempting to go £40 billion faster in deficit reduction than the plan the Chancellor inherited is not working, but pushing borrowing up. The right thing to do now is to expand demand—[Interruption.] Look, a one-year cut in VAT in its own terms would cost £12 billion. The question is what would be the impact on jobs, growth and deficit reduction. I am afraid that the Chancellor is borrowing not £12 billion more, but £46 billion more. The flatlining economy and rising unemployment mean that his deficit reduction plans are going off track. He should take the advice of the IMF and the OECD and change course.

[Harriett Baldwin (West Worcestershire) (Con)]

rose—

[Charlie Elphicke]

rose—

[Ed Balls]

I will make a little more progress, but I will take interventions from people who have not intervened. Good grief, I have given the hon. Member for Dover (Charlie Elphicke) enough of the wrong type of publicity already and do not want to do his career any more damage.

There is a credible alternative. Why will the Chancellor not act? He used to be so confident that his plan was working. It is patently not working. He and his cheerleaders on the Government Benches claim that however bad things get, he is trapped by the financial markets. He cannot take the advice of the IMF and the OECD and change course because it would lead to higher interest rates and recession. However, the IMF has said that we cannot have credibility without growth.

The markets know that rising unemployment and zero growth are undermining the Chancellor’s deficit reduction plan. One chief economist in the City at Baring Asset Management said last week:

“Growth is essential if the UK is to be able to finance new debt, repay old debt and convince the markets and credit rating agencies there is a modicum of competency in policymaking. The longer we pursue current policies, the more likely it becomes that the UK will be the next target”.

That is the real market view. We know that the credit rating agencies put out their press releases, but the real view, as the IMF has told us, is that having a flatlining economy and rising unemployment is the wrong way to get the deficit down. As I said, even the Chancellor’s friend at the IMF has said that

“growth is necessary for fiscal credibility”.

Britain has no growth. That is why our Chancellor is losing credibility.

[Harriett Baldwin]

Will the shadow Chancellor confirm that cutting VAT to 17.5% would cost £12.5 billion a year? Would that not simply shift demand from one year to the next?

[Ed Balls]

The Chancellor’s whipping team really must tell people to listen to the answers before they intervene.

The Nobel prize winner himself, Chris Pissarides, says in the New Statesman tomorrow that a temporary VAT cut is the right way—[Interruption.] I say to Government Members that Nobel prize winners who give good advice to the Chancellor should be listened to. Given that 70 more people are unemployed in the constituency of the hon. Member for West Worcestershire (Harriett Baldwin) than a year ago, perhaps she should start to listen too.

[Bill Esterson (Sefton Central) (Lab)]

I know that the shadow Chancellor is aware of the “Cut the VAT” campaign, which wants the Government to reduce the VAT on home repairs, maintenance and improvement work from 20% to 5%. Its analysis shows that when the rate was 17.5%, cutting it to 5% would have injected £1.4 billion into the UK economy in the first year alone. I wonder whether he is aware that the campaign is backed by 49 business organisations.

[Ed Balls]

I know the details of that campaign, although I do not know all 49 members. I know that it argues for a widening of our proposal.

One business organisation, the Federation of Small Businesses, has said:

“the Government’s growth strategy is just not working…We must see a cut in VAT to five per cent in the construction and tourism sectors to boost consumer demand.”

The business demand for a change of course is growing.

[Robert Flello (Stoke-on-Trent South) (Lab)]

My constituents, my right hon. Friend’s constituents and constituents across this country are seeing growth—growth in their gas and electricity bills and in their food bills. That double whammy is hitting our constituents on top of the mess that the Chancellor is making.

[Ed Balls]

Our constituents are seeing growth in VAT and in unemployment as well. The only thing that they are not seeing is growth in growth.

The markets are not the real reason why the Chancellor is determined to cling on to his failing economic policy. There are two obstacles in his way. The first is the coalition agreement. We know how desperate the Chief Secretary and the Deputy Prime Minister are for the Chancellor to stick to the deficit reduction plan, because they steamrollered their colleagues into signing up to a manifesto that explicitly rejected it. The Liberal Democrats’ manifesto stated:

“If spending is cut too soon, it would undermine the much-needed recovery and cost jobs.”

They were right, which is why there are so few of them here for this debate. They all know that their leaders graphically predicted before the election the very calamity that has happened after the election. The fact is, any successful coalition has to have the flexibility to change course when things go wrong.

“When the facts change, I change my mind. What do you do?”

Wise words from Lord Keynes, and he was a Liberal. He must listen to the current incoherent, confused and contradictory ramblings of the Business Secretary and turn in his grave.

[Duncan Hames (Chippenham) (LD)]

The shadow Chancellor is certainly showing flexibility in concluding that in time, it would be acceptable for VAT to reach 20%. When did he reach that decision, and will he be able to persuade his colleagues, whom we know are so adamantly against VAT at 20%?

[Ed Balls]

When I became shadow Chancellor six months ago, I said that I could not responsibly come along here and make commitments on what would be in our manifesto in four years’ time. What I can do is give the Chancellor good advice, and a temporary cut now is the right thing for growth and jobs in our economy.

It is not just Labour Members who support me on this. Listen to the former Liberal Democrat leader, the right hon. Member for Ross, Skye and Lochaber (Mr Kennedy), who said on “Question Time” last Thursday that he was

“more at the Ed Balls end of the argument than the George Osborne end of the argument.”

In saying that—Superman will like this—he joined me and the Mayor of London, Boris Johnson, in urging a change of course. Charles Kennedy, Boris Johnson and me—now that would be a coalition.

It is clear that the plan is not working. The markets know it, and so, increasingly, do the Chancellor’s coalition colleagues, but there is a second reason why this very political Chancellor will not budge. The clue was in the Prime Minister’s speech last week in Manchester. What did he say of the Chancellor? How did he describe his closest political friend? As “the man who would be king”. It was a very strange choice of book, because it is the story of two fantasists who end up stripped, beaten, tortured and forced to beg for their lives. That is some people’s idea of a good night out, but the idea that the Prime Minister should say that of the Chancellor is somewhat odd.

Anyway, there we are—“the man who would be king”. It was not in the printed text of the Prime Minister’s speech but was another slip from him. However, it is so revealing, because those words show why the Chancellor just cannot admit that he has got it wrong, even at a time when, at the weekend, The Sunday Times doubted his judgment. To change course now would be to admit that the Chancellor has got the key economic judgment of this Parliament wrong, and that would be a terrible blow to his ambitions. We therefore see him putting politics before the national economic interest.

Ploughing on with a failing policy is not leadership; it is the antithesis of leadership. It is not the making of King George; it is the madness of King George. A Chancellor without the strength to change his mind is a King Canute Chancellor, who says that he will stay the waves even as the tide turns before him. A man who would be king? He is a Chancellor exposed naked before the crowd, an emperor with no clothes, a Chancellor heading for a fall. I give him some good advice. For his sake, for his party’s sake and in the national interest, he needs to change course and do so quickly. It could be the making of the man.

In the face of the new global slowdown, we desperately need the Chancellor to rise above the here and now and see the need to change course, have a plan for growth and jobs, kick-start our economy and get us out of the slow lane. We need a balanced and credible plan on jobs, growth and the deficit, and action now before it is too late—Labour’s five-point plan for jobs and growth. I commend the motion to the House.

14:24

[The Chancellor of the Exchequer (Mr George Osborne)]

I welcome this opportunity to discuss the very difficult economic situation that this country and the rest of the western world face at the moment. After that vaudeville act, I am trying to remember whether the shadow Chancellor actually set out the five-point plan. He did not actually go through it, so we will go through it for him.

Of course, the concern of everyone here is to see growth, support jobs and get Britain through this debt storm; that is what we are talking about and working on. As this is an Opposition day, however, before I turn to what the Government are doing it is worth considering what the Opposition propose, and what the shadow Chancellor did and did not say. We should consider what his political friends, as well as his political opponents, are saying about him.

The right hon. Gentleman dismissed the intervention by one of my hon. Friends about Charles Clarke—[Interruption.] Well, there you go. It was not picked up by the microphones, but the shadow Chancellor just dismissively said, “Charles Clarke!” The Opposition dismiss everyone with whom they served in government. They boo their ex-Prime Ministers, they dismiss their ex-Ministers. Here is what the man who was the Labour Home Secretary said, not weeks ago but yesterday:

“I think the Labour conference failed to come across strongly with an alternative to what the Government is doing. I think the economic proposition that Labour puts at the moment is unconvincing…we are simply dismissed by most people thinking about the most central question facing the country today, which is the economy.”

That is the verdict not of the Conservative party, the Liberal Democrats or anyone else but of former members of the Labour Cabinet.

If we want to know why the shadow Chancellor is failing to convince the country, let alone his own party, of why he has not come forward with a convincing alternative, I suggest that we focus on three things that were not in his speech. I will cover each in turn. First, there was absolutely no plan to deal with the deficit. There was a not a single suggestion of how public expenditure could be saved. Let us remember what he said—

[Mr Dave Watts (St Helens North) (Lab)]

Will the Chancellor give way?

[Mr Osborne]

I will in a moment, because perhaps the hon. Gentleman can respond to this point.

The shadow Chancellor said, when we debated the matter in August, that he would set out

“a tough, medium-term plan to get our deficit down”.—[Official Report, 11 August 2011; Vol. 531, c. 1110.]

[Ed Balls]

indicated assent.

[Mr Osborne]

He nods, but where on earth is that tough, medium-term plan to get the deficit down? It was promised two months ago. Where are the cuts that he would make? He should give us some examples. We have been waiting for three years for ideas from the Labour party about what it would cut, and none has been forthcoming. The former Chancellor, the right hon. Member for Edinburgh South West (Mr Darling), who is in his place, was pretty revealing in his memoir about what was actually going on. He stated that

“the ‘investment versus cuts’ argument…simply wasn’t credible…I did want some examples of things we were prepared to cut. I could see, though, that there was no appetite for this in No. 10.”

And we know who was advising the occupant of No. 10 Downing street at the time.

[Ed Balls]

The International Monetary Fund has stated that if the UK has a period of stagnation or contraction, the Government should change course and delay their planned tax rise and spending cuts. The economy has flatlined since the autumn, with zero growth. Does that represent the sustained stagnation that would cause the Chancellor to take the IMF’s advice and change course?

[Mr Osborne]

The right hon. Gentleman quotes the IMF, but its managing director said a month ago that

“in the United Kingdom strong fiscal consolidation is essential to restore debt sustainability… The policy stance remains appropriate.”

The right hon. Gentleman also quoted the OECD, saying that it was telling me to change course, but the OECD’s chief economist, whom he used to quote in the House, says:

“The Government should not change its course. A cut in the VAT…would not be appropriate in our view.”

So before the shadow Chancellor bandies around the recommendations of international organisations, he should quote them properly in the House.

[Ed Balls]

I will quote them verbatim. The Chancellor quoted the IMF from September and the OECD from before the summer, but let me quote the IMF from October, just two weeks ago. It stated:

“If activity were to undershoot”—[Interruption.]

Let me read it, because the Chancellor has asked for the full quote, which is from October.

“If activity were to undershoot current expectations and risk a period of stagnation or contraction, countries that face historically low yields (for example, Germany and the United Kingdom) should also consider delaying some of their planned consolidation.”

Is that stagnation and contraction in place, and has it been in place for long enough yet to justify his taking the IMF’s advice of just two weeks ago?

[Mr Osborne]

In precisely the advice that the right hon. Gentleman reads out, the IMF, in its current forecasts for the UK economy, is very specific that the UK should not change its fiscal stance. It has consistently recommended that this country undertake credible deficit reduction. The Government have set out many proposals—controversial proposals—to get our budget deficit down, but in the 16 months that we have been in office we have heard not one single suggestion from the shadow Chancellor on how he would get the deficit down.

[John Mann]

Will the Chancellor give way?

[Mr Osborne]

I will take the hon. Gentleman’s intervention in a second.

Last week, the Opposition tabled an amendment to the Welfare Reform Bill that would have cost this country £11 billion. That one amendment on one day in this House of Commons shows how completely incredible they are.

[Mr Watts]

The IMF is changing its policy and calling for a plan B, as is business, the general public and everybody else. When will the Chancellor introduce a policy that will deliver growth?

[Mr Osborne]

The policies that we have set out deliver the low interest rates that are essential for economic growth.

[Nadhim Zahawi]

The shadow Chancellor has quoted the IMF. Why does the Chancellor think that the Labour party voted against our subscription to the IMF? Why did the Labour Government not put their best people to work to deal with the deficit and the debt, but instead hire 17 people and spend £4.8 million on the euro preparation unit?

[Mr Osborne]

My hon. Friend reminds me that one of the first things I did in the Treasury was shut down the euro preparation unit. More importantly—

[Ed Balls]

rose—

[Mr Osborne]

The shadow Chancellor, who has just been quoting the IMF, wants to intervene again, but let me say this, because my hon. Friend the Member for Stratford-on-Avon (Nadhim Zahawi) reminds me of another important point. Will the shadow Chancellor explain why he led his party—not everyone in his party, because I can see in the Chamber some prominent Labour Members who chose not to vote in that Division—into voting against a quota increase to the IMF, which was a central part of the London G20 summit chaired by the previous Prime Minister? How on earth does he think he could be taken seriously in any of the international meetings taking place at the moment if he had succeeded in winning that vote? Why did he do it?

[Ed Balls]

As the former chair of the IMF deputies, I am a huge supporter of the IMF. The rise in subscriptions is important, but for the Chancellor to try to ram it through the House before he sorted out the flawed European stability mechanism was a mistake—we voted against because we had doubts about his European policy.

However, to come back to my earlier intervention, let me ask the Chancellor this question again. Unemployment is rising, and output has been flat for a year: how much longer does he have to wait before he takes the IMF’s advice and changes his deficit reduction plan? How bad does it have to get?

[Mr Osborne]

We are sorting out the mess that we inherited from the Labour party. Much as I wish that that could be done overnight, it cannot. So great was the hole into which they put the British economy that it takes time and effort to come out of it.

[Tony Baldry (Banbury) (Con)]

Before my right hon. Friend was distracted, he quoted the previous Chancellor, who writes in his memoirs of his last pre-Budget report. He says that any coherent strategy would have been better than none, but that the previous Government simply did not have one. Are not the facts of the matter that the Labour party did not have a coherent economic strategy before the last general election, and that it still does not have one, as we all clearly heard this afternoon in the knockabout speech by the shadow Chancellor?

[Mr Osborne]

My hon. Friend is absolutely right. The previous Chancellor’s memoirs reveal the very divisive role that the shadow Chancellor played in stopping the previous Labour Government coming up with a coherent economic policy and a credible economic plan, and even in stopping Nos. 10 and 11 talking to each other.

[Mr Watts]

Will the Chancellor tell the House what level of growth he inherited and what it is now?

[Mr Osborne]

I shall tell the hon. Gentleman what I inherited as Chancellor and what this country inherited from the previous Government: we inherited the second deepest recession in the entire world. The hon. Gentleman talks about GDP, but we had the biggest fall in GDP of any country in the world with the sole exception of Japan.

[Several hon. Members]

rose—

[Mr Osborne]

I will give way in a moment, because I want to ask Opposition Members some questions. The House is today asked to support an Opposition motion that would add another £20 billion to the structural deficit. They maintain the fiction that they are sticking with the so-called Darling plan on the deficit—[Interruption.] That is what they say. Does the shadow Chancellor agree?

[Ed Balls]

indicated assent.

[Mr Osborne]

Okay. The motion tears up the Darling plan—it is £27 billion off the plan set out in the March 2010 Budget. That is the truth.

[Alison McGovern (Wirral South) (Lab)]

rose—

[Mr Osborne]

I shall give way to the parliamentary private secretary to the former Prime Minister to defend his record.

[Alison McGovern]

I will defend the record of our former Prime Minister any day of the week, but will the Chancellor defend his own record, and tell the House how far away he is from his deficit payback plan?

[Mr Osborne]

The hon. Lady has to defend the record of the former Prime Minister because he never turns up in this House to defend it himself.

The one thing that we want to avoid in a debt crisis is a sharp rise in interest rates, but that is what the motion would bring about. Let me give the House some new information.

[Several hon. Members]

rose—

[Mr Osborne]

I will give way in a moment. Let me make progress. Do not worry: there will be lots of opportunities for Opposition Members to answer my questions.

I can give the House new information on what just a 1% rise in interest rates would mean for this country at the moment. Such a rise would cost British families an additional £10 billion a year in higher mortgage payments and the British Government an additional £6 billion a year in higher interest costs, and it would increase our net payments to foreign creditors by around £15 billion a year—£15 billion that would leave our economy. Given the sums involved, the impact on family mortgages and small business loans would completely outweigh any fiscal effects of the proposals in the shadow Chancellor’s motion.

[Several hon. Members]

rose—

[Mr Osborne]

I said that I would give way in a moment. Labour’s approach would lead to a credit downgrade of this country. The shadow Chancellor shakes his head, but there is no doubt about that any more. This is what the credit rating agency, Standard & Poor’s—[Laughter.] Opposition Members laugh at the credit rating agencies and the need for this country to preserve its triple A credit rating, but Standard & Poor’s says that the ratings would

“come under downward pressure if the Coalition’s commitment to fiscal consolidation falters”.

That is what we would get under Labour: a downgrade to our credit rating, higher interest rates and the economy sent into a tailspin.

[Several hon. Members]

rose—

[Mr Osborne]

I give way to the right hon. Member for Holborn and St Pancras (Frank Dobson).

[Frank Dobson (Holborn and St Pancras) (Lab)]

Why does the Chancellor give such credence to Standard & Poor’s, which gave triple A ratings to every stupid, risk-taking banker, including those in Northern Rock? Standard & Poor’s advised Northern Rock on one of its products for about a year, and then surprisingly gave Northern Rock a triple A rating. Why should we take any notice of people like that?

[Mr Osborne]

That, of course, is the attitude of the Labour party. It ignores entirely the views of the world bond markets and the credit rating agencies. That is exactly the approach that got Britain into this economic mess. Because the Government have a credible plan, we are pulling this country out of that mess.

[Jesse Norman]

Does the Chancellor share my amazement at the lack of reality on the Opposition Benches? The eurozone is in crisis, the credit markets for the banking system across Europe are in desperate straits, and yields are rising, and yet the Opposition would squander £20 billion to £30 billion and increase our deficit.

[Mr Osborne]

My hon. Friend is absolutely right. Low interest rates are a precious commodity for the UK at the moment, and Members of the House, sent here to represent their constituents, have to ask themselves, “Do we really want an increase in interest rates at this time?” Is that what we want? It is what the motion would lead to.

[Several hon. Members]

rose—

[Mr Osborne]

I shall give way to the member of the Treasury Select Committee, the hon. Member for Edmonton (Mr Love) and then the representative of the Scottish National party, the hon. Member for Dundee East (Stewart Hosie), and then I shall make some progress.

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

How can the Chancellor possibly describe as credible a deficit reduction programme that ends up increasing debt by £46 billion?

[Mr Osborne]

As I have said, the British structural deficit is coming down because of the measures that we are taking, but the proposal put to the House today would push the budget deficit this year into double figures. No country in the world would consider that a sensible approach at a time such as this for a country such as Britain. It is economic nonsense, and I suspect that the hon. Gentleman knows it.

[Stewart Hosie (Dundee East) (SNP)]

I thank the Minister for giving way. He is being very generous. May I take him back to his exchange with the shadow Chancellor on IMF quotes? On 20 September, Monsieur Decressin, the senior adviser to the IMF research department, said that the IMF view was that

“policies in…the UK should only be loosened if growth really threatens to slow down substantially, relative to what we are forecasting. For so long as the forecast seems to pan out, there is no reason to change fiscal plans.”

The IMF has set down a marker for growth and, in effect, said that if it falls substantially, as it is doing, it would accept fiscal loosening. Does the Chancellor recognise that if growth continues to flatline or fall, there is at least an argument for fiscal loosening?

[Mr Osborne]

The IMF is clear that on its forecasts, which are some of the more pessimistic forecasts for the UK at the moment, it is not recommending a change in policy stance. That is what it says. It is what the managing director has said; what the article 4 report on the UK said; what the OECD is saying; and what all the business organisations in Britain are saying. That is why the path that the shadow Chancellor has laid out for the country is so incredible and does nothing to deal with the problems that he left to the country.

[Richard Fuller]

Will the Chancellor give way?

[Mr Osborne]

I shall take one more intervention and then make some progress.

[Richard Fuller]

In response to the question from the hon. Member for Dundee East (Stewart Hosie), I would say that that is not the answer to a debt recession, because a debt recession relies on credibility. One of the key points in the motion is that the Labour party’s so-called plan would provide, through a temporary reverse of the VAT increase, a benefit of £450 for every couple with children. Has the Chancellor worked out the benefit to average families in the country of maintaining the credibility of our country’s finances and ensuring lower interest rates?

[Mr Osborne]

As I was just explaining, a 1% rise in interest rates—I am not talking about the level of interest rates in Spain and Italy—would mean £10 billion in higher mortgage bills for British families. That is the reality of what the shadow Chancellor is proposing.

[Ed Balls]

rose—

[Mr Osborne]

I shall take the right hon. Gentleman’s intervention, and then I shall make some progress and give way again later.

[Ed Balls]

The former chief economist at the Cabinet Office, who actually drew up the plan B that the Chancellor then shelved, said in August:

“Low long-term interest rates appear to reflect economic weakness and lack of market confidence in the prospects of the UK economy, not the reverse.”

Is the Chancellor saying that the former chief economist at the Cabinet Office, now head of the National Institute of Economic and Social Research, is wrong to say that low interest rates are a sign of lack of confidence and prospects for growth?

[Mr Osborne]

I am glad that I took that intervention, because the implication is that the shadow Chancellor wants higher interest rates in Britain. That is the revelation we have just heard from him, and it tells us everything about what he is proposing: a catchy five-point plan—the clue is in the title—for a conference speech that would put Britain back at the mercy of the international bond markets, with higher interest rates affecting families and businesses and causing homes to be repossessed and jobs to be lost. We will have no part in it.

[Ed Balls]

rose—

[Mr Osborne]

I have already given way quite a bit. I shall give way again later when I have dealt with this point and when perhaps the shadow Chancellor can answer the questions that I am about to put to him.

[Ed Balls]

rose—

[Mr Osborne]

All right. If he has a good point to make, he can make it.

[Ed Balls]

The Chancellor—the Chancellor!—must be the only person in the whole country who thinks that to have Bank of England interest rates at less than 1% for three months is a sign of economic strength, not of the fact that our economy has not grown for a year and that unemployment is rising. The long-term interest rates at the long end of the curve are a reflection of expectations that those interest rates will stay persistently low. The former chief economist said that they

“reflect economic weakness and lack of market confidence in the prospects of the UK economy, not the reverse”.

Is the Chancellor saying that Jonathan Portes, from the National Institute of Economic and Social Research, is wrong?

[Mr Osborne]

My first point is that Jonathan Portes and I have had our disagreements for the past 16 months. He was not my appointment to the Government, but the shadow Chancellor’s, and he is not working for the Government any more. The second thing I want to say is that he cannot have it both ways. He cannot say that Britain is alone in facing these problems, which was the implication of his speech, and then not look at long-term interest rates—or, indeed, the short-term interest rates—in the United States and Germany, which are lower than ours, although we are close to them. [Interruption.] The shadow Chancellor says that they are weak. One of our problems is that the German, US and French economies have ground to a halt. That is why we also need a solution to the eurozone crisis, which has hit all western economies. His idea that Britain is unique in the world in facing these problems is frankly laughable.

[Mr Denis MacShane (Rotherham) (Lab)]

My constituents listening to this will be unable to comprehend all the statistics that the Chancellor is placing in front of us. However, we are missing the human dimension. In Rotherham, for the first time in nearly 20 years, unemployment today rose above 10%. That is taking us back to the south Yorkshire de-industrialisation of the 1980s. We are talking about real people. Does the Chancellor have even the tiniest nanoscintilla of doubt about his policy? He has been in charge for nearly 18 months. Does he have any concerns that perhaps his policy is not working?

[Mr Osborne]

I am clear that what we are doing is tough but necessary because of the very difficult situation that we inherited. The right hon. Gentleman talked about the impact in south Yorkshire. We inherited a record budget deficit and a bigger recession than in any other country in the world apart from Japan. That is what we are recovering from. Arguably, it was the biggest banking crash in the entire history of the country—at a time when those banks were supposed to have been regulated by the Government of which he was a Minister. That is what we are dealing with. Of course, it is extremely difficult, and many countries are facing problems at the moment, but I think that the steps that we have taken have helped us to weather this global debt storm and kept interest rates low for people in Rotherham. I shall come on to the steps that we can take to ensure that Rotherham does not suffer in the future as it has done in recent years under the Labour Government.

[Several hon. Members]

rose—

[Mr Osborne]

I shall make some progress and then take some more interventions.

I shall touch briefly—because we covered this during Monday’s statement—on the situation in the eurozone. I set out on Monday what I felt was needed and what many in the world now feel is needed: we need to ring-fence the eurozone by giving its bail-out fund maximum power; recapitalise Europe’s banks when they are weak; resolve the situation in Greece; and then set out the path to the political and economic changes required to make monetary union work, with greater fiscal integration and improvement in competitiveness on the periphery. I said that Britain wanted no part in the fiscal integration, but that we want to protect our say in the single market, financial services and competition issues. We also want the whole of the UK to become more competitive—with a more complete single market and freer trade.

Since Monday’s statement, we have had the news that the Slovakian Parliament has voted down the proposed changes to the eurozone financial fund—the European financial stability facility—which is clearly a disappointment. We all hope that it will pass in the coming days and urge the Slovakian Parliament to pass it. What has also been disappointing in the past couple of days is the suggestion from the President of the European Commission that Britain should make a direct contribution to eurozone bail-outs. Britain chose not to join the euro and the British Prime Minister has fought hard to get Britain out of the bail-out fund to which the previous Government signed us up. I want to make it clear that whatever the Commission President says, British taxpayers will not be contributing to the eurozone’s bail-out of Greece—full stop. However, we will work with our eurozone partners to help them to resolve the crisis and work with our international partners in institutions such as the IMF to ensure that they have the resources to deal with the problems across the world.

I said that the first thing missing from the shadow Chancellor’s speech was a credible deficit plan, but there was—

[Gavin Shuker]

Will the Chancellor give way?

[Mr Osborne]

Let me make just a little bit of progress and then I shall give way.

There was an absolutely staggering second omission from the shadow Chancellor’s speech, which was any reference—I will take an intervention if I have got this wrong—to Labour’s big new economic policy idea, which was unveiled at the Labour conference two weeks ago. I am referring, in case hon. Members have forgotten, to that great plan to divide British businesses into producers and predators—good and bad—and to levy different tax rates on them. Remember the speech from the Labour leader? Did the shadow Chancellor have any part in writing that speech?

[Ed Balls]

It was a very good speech.

[Mr Osborne]

At last there is something we agree on. It was absolutely the speech that we wanted to hear from the Labour leader at the Labour conference. I want to know what happened to this great idea, which was the centrepiece of Labour’s growth strategy for the new economy. Two weeks later it is not even referred to in the motion that we are being asked to debate. It is like the Lord Lucan of policy ideas: we do not know whether it is dead already or whether it has just gone missing for ever. I was really disappointed, because we know that the shadow Chancellor likes to cover all the policy areas in the shadow Cabinet and I was hoping for an explanation from him about how the idea was going to work. Are we supposed to grow our economy by levying new taxes and regulations on companies owned by private equity firms such as Boots, T-Mobile, the AA, Saga, Somerfield, Legoland and Chessington World of Adventures, those well-known centres of predatory business activity? [Laughter.] It would be laughable if it were not the centrepiece of the Opposition’s economic policy.

[Ed Balls]

rose—

[Mr Osborne]

Tell us what it is all about.

[Ed Balls]

What is completely laughable is taking a lecture from this Chancellor on growth. Let me ask him this. The Prime Minister’s out-of-touch statement that consumers should just pay off their credit cards—did he write it or did he ask for it to be taken out?

[Mr Osborne]

The Prime Minister gave his speech, which the shadow Chancellor should have paid close attention to, and made it absolutely clear that people are paying off their credit cards—because of the situation that the Labour party has left this country in—but I would ask the shadow Chancellor this question. He had a chance before; will he please mention—just once, in one intervention—the policy of the Labour leader? Come on, just get up and say you support it.

[Ed Balls]

I think the research and development tax credit to encourage and incentivise investment in research and development was a good thing. I think our proposal to cut national insurance for small companies that take on more employees is a good policy. It was in the Leader of the Opposition’s speech; it was in our five-point plan; it is in the motion—so why do Government Members not vote for it?

[Mr Osborne]

I guess that is called an “Ed Balls endorsement”—that is what the last Chancellor and Tony Blair got used to. We increased the R and D tax credit for small businesses in the Budget, so we have taken that idea—which we came up with—and introduced it. I am very pleased that the Labour party now supports it, but what about this idea that a Labour Chancellor would sit there in No. 11 with his home-made scales of justice weighing up the companies he likes and those he does not like and levying different levels of tax on them? What happened to that? It was the centrepiece of the Labour conference two weeks ago, and it shows why Labour simply cannot be trusted to run the economy of this country and why it has become the anti-business party again.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

I thank the Chancellor for giving way. It is interesting that he brings up those points, but can he please tell us where the ghost—or the ghoul—of the regional growth fund is? It has now been six months and the north-east is still waiting for the regional growth fund money that it was promised. Businesses are hanging on the wire for that money. Will he please tell us where that cash is?

[Mr Osborne]

Again, that was another opportunity to talk about Labour’s big economy idea. The hon. Gentleman did not take it, but I am glad that he raised the regional growth fund, which has allocated money to the north-east and other parts of the country. That money is flowing and those projects will get going. We are also setting up enterprise zones in Teesside and Tyneside, and doing what we can to get the north-east economy, which also suffered in recent years, on the front foot, creating private sector jobs so that that region, too, has prosperity.

[Mr John Redwood (Wokingham) (Con)]

I am grateful to the Chancellor for giving way. I welcome the work that he and his colleagues are doing on a growth strategy, which he said is needed. A big component of that is the £75 billion of quantitative easing. We are also told that there will be credit easing to get the money into private companies. Will that be on top of the £75 billion injection or within it?

[Mr Osborne]

It will be on top of the £75 billion. I have not gone through the QE and credit easing policies in detail today because I went through them in the House on Monday, but I would be happy to do so if Members like. QE is an operation undertaken by the Bank of England under the procedures established by my predecessor. The credit easing options that we are looking at involve the Treasury—or rather the Government—using its balance sheet to get money to small businesses either by purchasing securitised small loans, purchasing mid-cap company bonds in the bond market or issuing guarantees through the banking system. All those things currently happen in Britain, but on a very small scale. Our intention is greatly to increase them, and I will set out the proposals in November.

[David Wright (Telford) (Lab)]

I am grateful to the Chancellor for letting me intervene. Would he be willing to release all the information relating to meetings and discussions that he had with the Governor of the Bank of England on introducing the latest phase of QE, and does he anticipate that we may need more?

[Mr Osborne]

No, and not even in my memoirs, because the conversations between the Chancellor and the Governor of the Bank of England should be confidential. However, let me make it absolutely clear to the hon. Gentleman that we are talking about an entirely independent decision by the Monetary Policy Committee—not just the Governor of the Bank—and that I followed exactly the procedures established by my predecessor.

[Gavin Shuker]

rose—

[Mr Osborne]

No, I will make some progress and then perhaps take an intervention from the hon. Gentleman.

We did not hear today about the big Labour idea on the economy that was unveiled two weeks ago. Hitting businesses with more taxes and more regulation at a time like this is absolutely the wrong thing. The way to help businesses to create jobs is to give them competitive tax rates. That is why we have cut corporation tax this year—we have three more cuts to come—and why we have reversed the proposed Labour increase in the small companies tax rate and frozen business rates for all. It is also why we have set up a series of schemes to help unemployed people who have either just lost their jobs or never had a job into the labour market by getting them work. We have launched the biggest back-to-work scheme that the country has seen in 80 years and funded 250,000 more apprenticeships and 100,000 work experience places. Today we have launched the new sector-based work academies to help tens of thousands of young people with training and job interviews. Youth unemployment in this country has been rising since 2004. The last Government did next to nothing to confront it; we are rolling up our sleeves and getting stuck in to sort out this long-term problem for Britain.

[Toby Perkins (Chesterfield) (Lab)]

The Chancellor has been very generous in giving way, although not so generous in actually answering the questions that he has been asked. He has just laid out all the things that he is doing to put things right, yet the economy is flatlining, with record youth unemployment and no growth back in the economy. What is he going to do to improve the situation? Does he not recognise that we cannot just cut the deficit if we do not have growth?

[Mr Osborne]

We would not have growth if there was a big increase in interest rates. Let us look at other countries in the world that do not have a credible plan to deal with their deficits. Of course this is a difficult time, when many western economies have this problem, but we are taking the tough steps necessary to get the economy going and make it easier for businesses to hire people, which brings me on—

[Several hon. Members]

rose—

[Mr Osborne]

I will take interventions in a moment, because I want to know the Labour attitude to these policies that we are proposing.

We are proposing to extend the probation period before a new employee can make an unfair dismissal claim from one to two years. We are also proposing to introduce, for the first time ever, a fee that someone has to pay before they can take a case to an employment tribunal and which they get back if they win. Those are two difficult measures; they are controversial, but they will make it easier and less risky for businesses to hire people. I want to know whether the Labour party will support those measures when they come before the House of Commons. Will it? I want to know whether the right hon. Gentleman will support these things when they come before the House of Commons. Yes or no?

[Ed Balls]

Let me just ask the Chancellor—[Hon. Members: “Answer!”] Let me ask him a question to help us to shape our view. Will the impact of extending that probation period from one year to two years disproportionately hit men more than women, or women more than men?

[Mr Osborne]

It is not going to hit people; it is going to help people into work. I want to know another thing from the shadow Chancellor. I have made it clear that this proposal is going to help people to get into work and help businesses to hire men and women to do jobs without taking the risk that they might bring an unfair dismissal claim within the first couple of years. He kept talking about the Federation of Small Businesses in his speech; it supports the proposal. Does he? It is a simple question. Yes or no?

[Ed Balls]

Let me ask the Chancellor a question—[Hon. Members: “Answer!”] This is important. We need to know the facts before we take a view. Will women have to wait two years before they have any right to statutory maternity pay under his proposals?

[Mr Osborne]

No, no—I am talking about claims for unfair dismissal, and I want to know whether the right hon. Gentleman supports those proposals. This is not about statutory maternity pay; it is about extending the probation period for unfair dismissal.

Here is another question for the Labour party. The trade unions are proposing to go on strike this autumn. That is what they are balloting on. I think everyone in the House would agree that a strike is absolutely the worst thing for the British economy at the moment, and I want to know whether Labour will support that strike or condemn it. Is the shadow Chancellor going to condemn the strike—yes or no? And I do not want any weasel words about a proper negotiation process; I want to know whether, if it comes to a strike, he will condemn it.

[Ed Balls]

The whole country wants to avoid a strike, but that will require this Chancellor to change his proposals on a deeply unfair 3% rise in pension contributions. We can avoid a strike, but it will require this inflexible Chancellor to do the right thing, not the wrong thing.

[Mr Osborne]

That is another thing that Labour refuses to condemn. There we have it. We asked the former Labour Work and Pensions Secretary, Lord Hutton, to do a report for us. In his interim report, he set out a case for increased contributions. In his final report, he set out proposals for the defined benefit. We are negotiating on the basis of that. I want to know whether, if it comes to a strike, the people who are paid for by the trade unions are going to condemn trade union activity that would be the wrong thing for the British economy at the moment. Will the shadow Chancellor condemn it?

[Bill Esterson]

The only people in this country who want a strike are the people sitting on the Government Benches, because they think that they will get a short-term political gain from it. The Chancellor has mentioned interest rates a number of times. Is it not the truth that they, and confidence, are low because the economy has ground to a standstill because of his policies? Will he confirm that?

[Mr Osborne]

I will tell the hon. Gentleman what would damage confidence: a strike by the trade unions this autumn. Opposition Members are the people who are paid for by the trade unions, and I want to know whether they are going to condemn the strike or not.

[Several hon. Members]

rose—

[Mr Osborne]

I will make a bit of progress before I give way.

Not only are we taking measures to make it easier to employ people and putting in place measures to get people back into work—[Interruption.] They are not going to hit women; they are going to help women get into work. We have also announced new investment in local transport links. We are spending more on roads and railways than the last Labour Government did. We have plans for 200,000 new homes, many of them on the back of a new right to buy. We have created two dozen new enterprise zones, and this month committed almost £250 million to world-beating scientific research. That is because, unlike the last Government, we think it is important that things are made in Britain again.

[Andrew Selous (South West Bedfordshire) (Con)]

The Chancellor has just told us that there have been £31 billion of extra Labour spending pledges—£11 billion from an amendment last week and £20 billion today. Given that we already pay £120 million every day in debt interest, can he tell us how much extra debt interest we would be paying every day if those Labour proposals went through?

[Mr Osborne]

I have not got that calculation on me, but I will certainly give it to my hon. Friend and use it at a future opportunity, because it is a reminder that this money is coming directly out of the Government coffers in debt interest payments every single day.

[Several hon. Members]

rose—

[Mr Osborne]

I will make a little progress, as I know that many people want to speak in the debate.

We have taken steps to try to help people who are facing this difficult situation. We have announced a freeze in council tax, not just this year but next year, and we have taken more than 1 million people out of income tax and delivered an income tax cut for 20 million more. The shadow Chancellor often talks about fairness in paying for all those things, but I want to know why, in all the years that he was chief economic adviser to the previous Government, he blocked and never introduced a permanent bank levy. Why did he never introduce a higher charge for long-staying non-doms? Why did he never conclude a tax treaty with Switzerland to get back some of the money that should be paid into the British Exchequer?

[Ed Balls]

rose—

[Mr Osborne]

I will give way to the right hon. Gentleman after I have made this point. His only achievement in that field was to introduce a capital gains tax regime so riddled with loopholes that some of the richest people in this country boasted about paying less tax than the people who cleaned their houses. Is he proud of that record?

[Ed Balls]

Under Labour, child poverty fell by more than 500,000. Will the Chancellor tell the House what, according to the Institute for Fiscal Studies, will happen to child poverty this year and the year after? Will it fall, or is it going to rise under his chancellorship?

[Mr Osborne]

The IFS says that child poverty is rising, but the reason it is rising is that the right hon. Gentleman put this country into a complete economic mess. I can see my right hon. Friend the Secretary of State for Work and Pensions standing at the Bar of the House. He is introducing universal credit, which will do more than any other measure to bring child poverty down, to give opportunities to people who have none at all, and to ensure that work pays. That is what we are doing, and I want to know whether the shadow Chancellor supports that. Does he?

[Ed Balls]

I support welfare reform—[Hon. Members: “Ah!”] Of course I do, but I have to say that I hope the Chancellor will give the Work and Pensions Secretary the money to make it work. The IFS said this week that any gain in child poverty through universal credit would be more than swamped by the Chancellor’s other measures, particularly the change from RPI to CPI, so that the fall in child poverty under Labour would be reversed under the Tories. Is the IFS right?

[Mr Osborne]

I thought that Labour supported the link to CPI. Is the shadow Chancellor changing his mind on that? In the debates, the Labour party supported the link to CPI, and he has just raised the matter. Has he changed his mind? [Interruption.] Thank God he has a new shadow Chief Secretary to give him the answer.

[Ed Balls]

We have always said that we would support a temporary rise in CPI during this Parliament, but that we would not support a permanent rise. It is a permanent rise that will see child poverty rising year on year under the Tories. Child poverty fell under Labour; it will rise under the Tories. That tells us everything that we need to know.

[Mr Osborne]

The shadow Chancellor is all over the place. He was asking me about child poverty numbers in 2012, 2013 and 2014, and he said that, according to the IFS, the principal cause of the rise was a policy to link benefit increases to CPI. That is a policy supported for this Parliament—that is, in 2012, 2013 and 2014—by the Labour Opposition, and it is complete hypocrisy for them to complain about it now. Will the shadow Chancellor confirm that he supports the CPI policy for this Parliament—yes or no?

[Ed Balls]

The permanent rise in CPI is a mistake. Will the Chancellor confirm his support for the law of this land that child poverty should be abolished by 2020?

[Mr Osborne]

We have kept that target, but the right hon. Gentleman has still not confirmed that—[Interruption.] I welcome the shadow Chief Secretary to her position, but I have to tell her that the shadow Chancellor has just raised with me the question of the IFS estimates on child poverty over this Parliament. The IFS says that one of the principal causes is the policy on the link to CPI. That is the IFS’s view, although universal credit will do a huge amount to offset that impact. It is a policy supported by the Labour party, and it is completely hypocritical of the Labour party to come to this Parliament and raise those statistics and complain about that policy when they said they supported it all along.

[Several hon. Members]

rose—

[Mr Osborne]

Let me make a little progress, as I know many Members want to speak.

I shall touch finally and briefly on the last thing missing from the shadow Chancellor’s speech—and we all know what that was. It was an apology for everything that had gone wrong. The right hon. Gentleman has apologised for so many things now—for the worst banking crash in our history, the 10p tax rate, the 75p pensions increase, gold, although I am not sure that he has apologised for that, the feuds in Downing street—yet he still refuses to apologise for spending and borrowing too much. He said that Labour did not spend “more money” than “we had available”, but he missed his golden rule by more than £400 billion. He doubled and then redoubled the national debt. Everyone knows he was spending too much, and everyone has said so. The IFS, since he mentioned it, has said so; Tony Blair has said so; the last Chancellor conceded it in 2007. It is an open secret that half the shadow Cabinet want him to make this apology, but the shadow Chancellor refuses to do it—and we know why. If he did, it would be the final damning indictment of the economic policies he imposed on this country for a decade or more. It would be the final confirmation that his promise to end boom and bust—remember that?—led to the greatest boom and the biggest bust this country has ever seen.

What did we get? No apology; no mention of Labour’s latest economic idea; no credible plan to reduce the deficit. That is why Labour is neither convincing nor credible on the economy. Yes, these are difficult times; yes, this is a global debt crisis. We are dealing with Britain’s record debt problems. We have set out a course to ride through the storm and build a more prosperous future. Today we were reminded that no one, least of all the people who got us into the mess, has produced a convincing alternative to the course we have set.

[Several hon. Members]

rose—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. I inform the House that more than 40 Members wish to participate in this afternoon’s debate, so Mr Speaker has applied an eight-minute time limit to all speeches from the Back Benches from now on.

15:12

[Mr Alistair Darling (Edinburgh South West) (Lab)]

As the Chancellor has referred to my book—and no doubt others will do so, too—perhaps I should draw the House’s attention to my declaration in the Register of Members’ Financial Interests.

From listening to the Chancellor, it is easy to forget one important fact. When we left office in 2010, our economy was growing; 12 months later, our economy is not growing at all. Growth has stalled, probably for more than a year. Despite everything that the Chancellor and his colleagues said during the last election about its all being the fault of the last Labour Government and nothing to do with global problems or Europe, our economy was growing. Now, 16 months after that general election, while the Chancellor has been in charge and responsible for setting the economic direction, our economy has stopped growing. Even a few months ago people believed that we might see a slow but gradual climb out of recession into growth, but now, right across the world, people are seriously worried that we could be in for a prolonged period of stagnation—at tremendous cost to the country, as today’s unemployment figures show.

[Sajid Javid]

rose—

[George Freeman (Mid Norfolk) (Con)]

rose—

[Mr Darling]

According to Madam Deputy Speaker’s ruling, I have only eight minutes, which means I can give way twice to my benefit; after that, it counts against me. I will, however, give way to the hon. Member for Bromsgrove (Sajid Javid).

[Sajid Javid]

I thank the right hon. Gentleman for giving way. He said in his recent memoirs that Labour still needs to offer a “clear and viable alternative”. Does he believe that he has heard that today from the shadow Chancellor?

[Mr Darling]

As we have heard today, the shadow Chancellor and the Labour party are still adopting my policy on the deficit. It was a sensible policy when I first announced it in 2008, and it is still a sensible policy today. The heart of my present argument is that while no one doubts that the deficit has to come down, the judgment to be made is about how fast we bring it down and the risks involved in doing so too fast and ending up crashing the economy. That is the position we have reached today.

It is interesting that the International Monetary Fund has been much discussed this afternoon. It is worth reading what the IMF and Christine Lagarde, who talks a lot of sense on these issues, have been saying. Of course the IMF is always going to be wary of taking on one of its principal shareholders, but we do not have to read too far between the lines to see what the IMF is saying. It is saying quite clearly that there is now a serious risk of a slow-down in major economies, including our own, which will result in not less but more borrowing, and economies stagnating.

It is also interesting that when the Bank of England announced last week further measures of quantitative easing, which I support, it did so against a completely different background from its first announcement in 2009. The Bank is now worried about what is happening in Europe, which means that the economy is slowing down. The Bank is seriously worried about the lack of growth. The QE announcement last week is just the beginning of what might be called plan B or even plan 1A, because the Bank is worried. That is why it is changing direction.

I was pleased to hear the Chancellor talking about credit easing for businesses on top of the £75 billion. Surely that is at least some recognition of the fact that the plan he announced with so much confidence last summer, which was going to do so much to reduce our borrowing, is not working. He has to adapt it and my bet is that—whether it be in the autumn statement in a month’s time or in next year’s Budget—we will see more measures that acknowledge that the policy pursued by this Government is simply not working. If we do not change it, we will pay a very heavy price.

[Kwasi Kwarteng (Spelthorne) (Con)]

rose—

[Mr Darling]

I will gain another minute by giving way to the hon. Gentleman, so I will do so.

[Kwasi Kwarteng]

I am grateful. Will the right hon. Gentleman tell us how he voted in the IMF subscription vote?

[Mr Darling]

I have always made my position clear. One of the big achievements of April’s G20 meeting, led by the then Prime Minister my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown), was to get countries to sign up to an increase in IMF funding. That has always been my position, and I am not going to depart from it because I believe that the IMF has a central role to play. With respect to the hon. Gentleman, his intervention does not get him off the central point of this debate, which is what is different now from the position when we left office. My deficit reduction plan was on the back of an economy that had started to grow, so my right hon. Friend the shadow Chancellor is quite right to ask himself what we need to do now, 16 months later, when economic growth has stalled, and what other measures are necessary to get the economy going.

My right hon. Friend is also quite right to say that, although a few months ago very few people were talking about the need to reduce taxes, bring forward capital spending or take measures to help businesses, that has now become common currency among many commentators. It is only the present Government who simply do not accept that the plan they announced 16 months ago is not working. As my right hon. Friend said, the Chancellor has had to downgrade his growth forecast four times. I remember his having great fun at my expense when saying that my growth forecasts were wrong. Actually, mine lasted a lot longer than his. He should reflect on that and on the fact that he is having to borrow more.

I raised another point about quantitative easing with the Chancellor on Monday and I hope we will hear more about it. If that money does not leave the vaults of the banks and get out on to the high streets, it will have failed. I know that the Chancellor has had exactly the same trouble with the Bank of England as I had. I could not persuade it to buy corporate assets; he has obviously failed as well, which is why he has had to think up his own scheme. We really need to get that money out on to the high streets; if it is not manifested in the form of loans to businesses, it will simply not work.

I note that the hon. Member for West Suffolk (Matthew Hancock) is no longer in his place. He said that quantitative easing works only when there is a credible policy. Given that the Bank of England has said that it worked, we must have had a credible policy at the time. I am sorry that the hon. Gentleman is not here to hear that; he might want to ponder it when he reads Hansard tomorrow morning, as I am sure he will. The Chancellor needs to ensure that the money gets out on to the high street; otherwise, it will fail. It is remarkable that the Bank of England is almost now doing what the Government should be doing. It recognises that the policy is not working, which is why it has embarked on another round of quantitative easing.

The Chancellor is fond of saying that all our problems are on account of the eurozone. That, too, is remarkable. When he came into office, the Tory story, backed by the Liberal Democrats, was that it was all the fault of the last Labour Government. All was fine with the rest of the world, so it was just Labour’s overspending that was responsible. Incidentally, the Chancellor supported it right up to the end of 2008 and the Liberal Democrats supported it until the day after the general election, so it could not have all have been wrong at that stage. Now they are saying that the problem is not domestic at all; that it is all to do with what is happening in the eurozone.

Of course the eurozone is a major problem and it is becoming a bigger one by the day. I hope the Chancellor was right when he said at the beginning of the week that wiser counsels are prevailing in Europe, but I am not so sure. We should remember this: although people talk about the fact that the German Parliament ratified the deal a couple of weeks ago—and Slovakia will probably put it through later this week—it was in fact agreed in July, and it is blindingly obvious that it is now out of date. At that time no one would talk about Greek default, whereas now everyone knows that Greece will default, and the only question is whether it will be done in a managed way or become a disorderly breakdown.

Another thing that is obvious—the Chancellor acknowledged this on Monday—is that the austerity measures being imposed on Greece simply are not working. Greece is reaching a point at which it is unlikely to be able to repay the interest on its borrowing, let alone reduce its borrowing and debt. The policy of austerity endorsed by far too many European countries over the last 16 months or so worked at first, but it is not working now, and Greece is living proof of that.

I hope that something compelling and convincing will be agreed at the G20 in a couple of weeks’ time, but I have my doubts. The trouble with the eurozone countries is that they are still fighting as though nothing has changed since the early summer, which has been their position since the early part of 2009. If we have any influence I hope that we will bring it to bear. If we do not, there is a risk, as the Chancellor himself recognises, that if things go wrong in the eurozone they will affect this country. While I agree with the Chancellor that we should certainly should not contribute to the bailing out of the eurozone, he is also right to say that a break-up of the euro at the present time is the last thing that the world economy needs, ourselves included.

That brings me to our policies back at home. I have always believed that reducing public expenditure at such a rate, in a climate in which the private sector is not taking its place, risks crashing the economy. I reached that view when my party was in office, and I still hold it today. The evidence seems to suggest that that is precisely what is happening now, and that is why it is so damaging.

[Richard Graham (Gloucester) (Con)]

Will the right hon. Gentleman give way?

[Mr Darling]

I will not, because it will count against me if I give way again.

I hope that the Chancellor will produce measures to deal with the situation. He may wish to embark on infrastructure projects, although in my experience that is much easier said than done, and the interval between making a plan and putting a shovel into the ground can be a long one. Some of the road schemes that the Chancellor mentioned were planned by the Labour Government—one of them back in the 1970s—so we should not get too carried away about them. However, he should certainly introduce the tax reductions and other measures to help businesses to which my right hon. Friend the Member for Morley and Outwood (Ed Balls) ascribed such importance.

It is clear to me that we cannot resign ourselves to circumstances in which people feel that nothing can be done, that it is all inevitable, and that nature must take its course. Governments can make a difference—they made a difference two years ago at the G20 in 2009—but we currently have no international leadership, and we have precious little leadership from our own Government when it comes to what we should be doing in this country. There is, and there must be, an urgency attached to getting these things right, but that means a change of policy here at home as well.

15:22

[Mr Andrew Tyrie (Chichester) (Con)]

This debate about growth contains three distinct components, although, of course, there are close connections between them: the strategy to stabilise the public finances, the strategy to secure recovery, and the strategy to raise the long-run growth rate. I want to say a little about each of those.

There has been a fair amount of partisan politics around today, and I do not intend to add to it unless severely provoked. As I have said in the House a number of times before, the right hon. Member for Edinburgh South West (Mr Darling) deserves considerable credit for his March 2010 Budget, with its plans for sharp cuts in spending and borrowing. Equally, the coalition deserves credit for its own plans. Our present low debt service costs speak for themselves. They reflect the credibility invested by markets in the deficit reduction strategy and the belief that the coalition will stick with it, and the country will be the beneficiary of that.

As for policies to secure recovery, we can all agree that, given the eurozone crisis, the international economic outlook is much worse than forecast either by the right hon. Gentleman in his Budget 18 months ago or by the Office for Budget Responsibility this spring, and I am sure more surprises will follow. However, it is not true that the Government are doing nothing in response, as the right hon. Gentleman implied. They have rightly adapted to the situation, and the recovery strategy has changed. The Bank of England has adapted by announcing the second tranche of quantitative easing, and the Chancellor will adapt by announcing credit easing in his autumn statement.

I strongly endorse the Chancellor’s decision to favour monetary policy as the short-term tool rather than tinkering with tax changes, which is what is proposed in the five-point plan. I am sure that the Treasury Committee will want to examine exactly how the Government have changed their policy on the recovery strategy and whether QE2 and credit easing are the best tools, but I think everybody can agree that it was timely to take action. We can also agree that British taxpayers should not be asked to contribute to any further eurozone bail-out.

[John Mann]

History shows that the use of monetary policy has invariably led to an increase in inflation, which has sometimes been a hidden deliberate policy aim. Regardless of whether it is a good or a bad policy, does the hon. Gentleman expect an upward drift of inflation as the conclusion to the way in which monetary policy is currently being used?

[Mr Tyrie]

I will not answer that at any length, except to say that I am of course making my points in a personal capacity, because as a Committee we may comment on growth after the autumn statement. Let me also point out that the Governor gave a comprehensive reply to the hon. Gentleman’s question when he introduced the second £75 billion tranche of measures. He pointed out that money demand was extremely low at present, and that therefore he thought that the risk of inflation over the next two to three years was extremely low.

[Mr Julian Brazier (Canterbury) (Con)]

Will my hon. Friend give way?

[Mr Tyrie]

I will give way for a second time. I will adopt the same policy as the right hon. Member for Edinburgh South West, and pick up the maximum injury time.

[Mr Brazier]

As well as monetary pressure being extremely low at present, some of the larger ticket items such as commercial and domestic property which are outside the usually looked at measures such as CPI and RPI have been going down rather than up.

[Mr Tyrie]

I broadly agree with that. There is always a problem with measuring inflation—there is always a dispute about exactly how to capture it best—and we will never get it exactly right. I will not go into any further details now, but I agree with the core of what my hon. Friend has said.

Work on both the deficit reduction plan and the recovery plan have been firefighting to deal with our inheritance—less from the right hon. Member for Edinburgh South West than from his predecessor, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown). Let me now deal with the third aspect of the growth strategy, which consists of policies to improve the long-run growth rate and long-run economic performance: what the policy wonks call supply-side reform. The coalition's inheritance needed attention in that regard as well.

A few days ago I made a number of proposals for supply-side reform in a pamphlet, and they seemed to make everyone very excited. The Government growth agenda set out in the spring was a start, but, as the Chancellor said in his party conference speech,

“We need to do more”.

In that pamphlet, in a personal capacity, I made a few suggestions. In a nutshell, we need to work much harder to produce a comprehensive strategy embracing tax, reform of the labour markets, financial regulation, energy policy, transport and competition policy. We have been firefighting so far, but now is the time to start developing that longer-term strategy.

It is worth bearing in mind that it took the Thatcher Administration the best part of four years to get round to doing much of this, and I realise that this type of policy is easy to talk about but difficult to deliver. What matters most is that the creative energies of small businesses in our constituencies are released to increase the long-run growth potential of the economy. That is a big reform job. We have to bear in mind all the time that it involves millions of people—small traders and people working in small businesses—and that it is they who will restore the economy to health, not Governments and not Parliament. We need to make it much easier for them. Let us consider just one area: taxation. The Treasury Committee has flagged up some of the—largely inherited—contradictions and inconsistencies in the tax system, and argues that further tax reforms should be based on a few simple and coherent principles: certainty, simplicity, stability and fairness. We are a long way from achieving that in our tax system and there is a lot still to do. Encouragingly, the Chancellor said he strongly supported tax simplification; he has made that point on a number of occasions and he has created the Office of Tax Simplification.

The Chancellor announced in his speech at last week’s Conservative party conference that he would push ahead with further labour market reforms, and he has mentioned that again today. Of even greater significance could be the Chancellor’s commitment not to push ahead of other European countries on carbon reduction targets. I and many other people have been arguing for that for a long time, all the way back to our deliberations on the Climate Change Act 2008. The rapid pace of carbon reduction will push up business costs and also provoke great controversy, for example in respect of wind farms. Therefore, the Government are right to think again about that policy. It is now crucial that the coming autumn statement gives a decisive push to measures for improving long-run economic performance. It is equally important that that is seen not as a programme for a year, but as a remorseless project for the long term.

For much of the last decade, politicians of both major parties talked as if the economy need no longer be the top priority. For it was an age of abundance: it seemed that we could concentrate on how to spend it and quality-of-life issues. We forgot that most politics is hot air unless the economy can afford to deliver on the promises made by politicians. The complacency about growth that infected both parties encouraged the irresponsible lending and borrowing of the last decade. The electorate have noticed that they were led up the garden path, most notably by the absurd claim that Governments could put an end to boom and bust—so my final point is a presentational one. Politicians and Parliament must demonstrate that the public’s No. 1 priority is also their own No. 1 priority. The electorate’s No. 1 priority at present is to protect their living standards and their children’s prospects.

[Mr Deputy Speaker (Mr Nigel Evans)]

I now have to announce the result of the deferred Division on the question relating to tribunals and inquiries. The Ayes were 309 and the Noes were 20, so the Ayes have it.

[The Division list is published at the end of today’s debates.]

15:32

[Stewart Hosie (Dundee East) (SNP)]

This Government’s refusal thus far to countenance a plan B will come back to haunt the Chancellor, the Chief Secretary and the Prime Minister. The current plan to remove the entire structural deficit in the fixed time scale of a single Parliament was incredibly risky to start with, and now appears almost impossible. It was dependent on export growth from a strong eurozone, which is not there. To be fair, the overall trade figures are a little better this year: the balance of trade is £9 billion in the red for the first quarter, but in the second quarter it stood at £24 billion in the red, and the aggregate for the first two quarters is almost as much as last year’s catastrophic £99 billion deficit in the trade in goods out-turn.

The Government’s plan depended on business investment growth of a rather heroic 8% to 11% each and every year, but that is not there either. Indeed, the gross fixed capital investment figures for this year show that investment fell by 2% in the first quarter and is lower than in the same quarter in 2010. Growth is now effectively flatlining, and although borrowing was down between April and August, it is up between August this year and August last year and is forecast to be as much as £46 billion greater. Therefore, something needs to change, not least because according to the National Institute of Economic and Social Research it is likely that the entire consolidation plan will cut almost an entire percentage point off GDP growth this year. It has said that

“it remains our view that in the short term fiscal policy is too tight, and a modest loosening would improve prospects for output and employment with little or no negative effect on fiscal credibility.”

If the Government are concerned, as they would be right to be, about the credibility of their plan and if others are saying that a modest loosening, which would help growth, would have no impact on the credibility of the plan, they should listen, not least because if they do not, the entire deficit reduction strategy is at risk, as the NIESR suggests.

On 2 August, the NIESR said that if things go on as they are:

“The Chancellor will miss his primary target of balancing the cyclically adjusted current budget by…around 1 per cent of GDP.”

Perhaps the Chancellor has listened and perhaps that is what he was alluding to in his statement on 11 August when he said that we should be “realistic” about the dangers in the global economy and “set our expectations accordingly.” I pressed him at the time on that and he was not very forthcoming. If he is to change his expectations, he is, as the previous Chancellor said, going to have to change his policy as well.

[Richard Graham]

The Opposition motion, which the hon. Gentleman presumably supports, focuses very much on a plan for jobs and growth. I would like to share with him some statistics that I found with the help of the Library. They show that between 1997 and 2010, when the shadow Chancellor was the previous Government’s chief economic adviser, the number of jobs in business in my constituency shrank by 5,600, or by 13% of the employment work force in the entire constituency. From what I have heard today, plan B really amounts to adding more mortgage costs for families and doing nothing for growth of jobs in the business sector. This Government are doing a lot to help that with structural change. Does he agree?

[Stewart Hosie]

We believe that there has to be a change because this plan is not working. That will involve: direct capital investment, which we know does work, and I shall come on to that; consumer confidence, which is vital; and access to bank finance. The Labour Opposition’s motion is a good tactic to debate this matter and we will back it, because in principle we want to see something done. However, if the hon. Gentleman does not mind, I will concentrate on my proposals.

I have said that there are problems with the Government’s plans. This has not just been about the absence of a strong eurozone to export to or of heroic rates of business investment; it has been about the fact that the forecast rates of growth for this and the next years of 2.3%, 2.8%, 2.9%, 2.7% and 2.7%, as set out in the 2010 Budget, will not be achieved. Indeed, Robert Chote, the head of the independent Office for Budget Responsibility, said that even to achieve a 1.7% growth rate now would require

“quarter-on-quarter growth rates of 1%...and there aren’t many people out there expecting that.”

I suspect that there are no people in here expecting that.

So the Chancellor needs to stimulate now, and the best way of doing so is through direct capital investment. As we know, the OBR has said that the impact multiplier for this is 1:1. It is the most effective form of stimulus that the Government have and they should use it. It is also the area where the Government can make the most damaging cut. I know that he wants to tell me that they are keeping £2 billion more in direct capital investment than Labour planned, but very large cuts are still being made. It was not just the OBR saying this, as the British Private Equity and Venture Capital Association was doing so too. On 23 September, it cited the OBR’s view that

“boosting capital spending is a far more effective way of boosting GDP than cutting VAT, tweaking welfare entitlements or increasing current spending. In fact, the OBR’s multiplier on capital spending is one-for-one…This means that the Government could increase capital spending and still deliver the planned reduction in net debt as a share of GDP.”

So again, there is no lack of credibility in changing policy and there is no impact in the planned reduction of net debt as a share of GDP in changing the policy.

The BVCA goes on to say:

“There are other good reasons for targeting infrastructure. The dramatic cuts to the investment budget that were pushed through last year will weigh substantially on private sector productivity in the years ahead. Capital spending is due to be cut by about a third in cash terms between FY09/10 and FY15/16, implying an even larger real decline.”

So if the UK Government really are serious about private sector growth in the medium and long term, they should be very concerned that a body such as the BVCA is prepared to say that cuts now will weigh substantially on private sector productivity in the years ahead. Of course, its key point is not even that. It states that

“in order to have an immediate impact on activity, the Government would need to start spending money straight away. That could mean dusting off some previously shelved plans, as there is no point in waiting 12 months”—

I think it is right—

“for any boost to be felt.”

That is good advice and I hope the Chancellor is listening.

The Chancellor does not need to focus only on capital investment. He needs to ensure proper access to business finance and that the £75 billion of quantitative and credit easing hits the real economy. Evidence from Japan suggests that bank lending fell during the whole quantitative easing exercise, and evidence here shows that between February 2009 and January 2010, when £200 billion of QE was issued, bank lending fell month on month and has remained below the starting point in every month since. That is extremely damaging. This time, the Chancellor must ensure that that money does not go through a pipe to the banks to pack balance sheets but touches the edges and hits the real economy.

[Mr Love]

Does not the evidence also show that Project Merlin is failing? Does not the evidence also show that credit easing, although it is sensible in itself, will take a long time to bring in? What we need is a credible policy to finance small business.

[Stewart Hosie]

That is absolutely right. I heard the Chancellor say this week that he has considered how the Government might fund business investment directly. There is merit in that. I am prepared to give this term of QE and the credit easing a chance to work, but I tell the Chancellor that if the £75 billion-plus of new electronic money goes to the banks or is used to buy back Government debt and does not hit the real economy, neither the banks nor the Government will be forgiven this time if it fails. Too many businesses are hurting due to a lack of business finance.

[David Rutley (Macclesfield) (Con)]

Will the hon. Gentleman give way?

[Stewart Hosie]

No, I shall stick to the same adage as everyone else and give way twice.

The third thing that needs to be done is to restore consumer confidence and economic security. Fundamentally, that means keeping people in their jobs, and Government and their agencies remain responsible for plenty of jobs. That means that pay policy in the public sector should bring down the salaries of senior people, bonuses should be removed from senior public servants, there should be temporary pay freezes for those on average incomes, help should be provided for those earning under £21,000 and specialist systems and a working wage should be introduced for those earning least of all. However, it also means delivering a no-compulsory-redundancy policy for staff employed by Government, the NHS and the other public bodies when agreement can be reached. We know that this plan—a mix of direct capital investment, confidence, and improved business finance or taking some of the burden off businesses—can work. We have seen it in Scotland, where even with the unemployment figures published today, unemployment is lower, employment is higher and economic inactivity is lower.

We know that such a mix of activity can work and, of course, it is broadly in line with what Christine Lagarde called for in September, when she said that

“countries must act now—and act boldly—to steer their economies through this dangerous new phase of the recovery”.

It also mirrors her comment in August to the Financial Times when she said that

“short-term measures must be supportive of growth, yet economical in terms of the impact on fiscal sustainability, and can include policies supporting employment creation, advancing planned infrastructure and easing adjustment in housing markets.”

There is no reason, other than dogma, not to follow the ideas laid out by those on the Opposition Benches today to kick the economy out of its torpor. I urge the Chancellor to use his autumn statement to do just that. He can call it plan A-plus, he can call it plan B, but he must change, develop and deliver quickly.

15:43

[Michael Fallon (Sevenoaks) (Con)]

I remind the House of my interest recorded in the register.

There is some common ground on both sides of the House. Growth is the key, and although the Government cannot create jobs and businesses, they can set the conditions for sustainable growth through sound money, a fair and competitive tax system, an infrastructure in which businesses can flourish and, above all, keeping control of their side of the economy—the public finances. The previous Government clearly failed to do that. They failed to balance their budget for nine successive years after 2001 and they doubled then redoubled the national debt, leaving us with the largest structural deficit in the G20. Worse still, for the longer term, they left us a rate of growth that simply was not sustainable because it depended on ever-increasing public expenditure—now, I note, more than 50% of GDP for the third year running—on a boom in commercial and residential property prices that simply was not viable in the longer term, and on an over-blown banking and financial sector. We are now dealing with the consequences of the collapse of that sector.

In the end, it was all an illusion. The previous Government created a pyramid of debt and called it investment. They spent all our money on an unreformed public sector without bringing the improvements in productivity that we saw over the same period in the private sector. On the capital side, they spent it on a whole series of expensively engineered, private finance arranged schools, hospitals and the rest. Above all, as was sadly confirmed yet again today, they left us a lost generation of nearly 1 million youngsters under the age of 25 who were under-educated, underskilled and under-equipped for the needs of modern business. That is why I support a Government who are now laying the proper foundations for genuine growth on top of their fiscal consolidation plan by encouraging bank lending, cutting taxes on business and cutting regulation.

I particularly welcome the announcement made by the Chancellor in Manchester, which he repeated today, about reforming the rules regarding employment tribunals, which will make employment easier. That is one reason why I support it—another is because it will reduce the huge cost to business not only of the awards themselves but of the time taken to manage and handle cases that businesses would prefer not to get to tribunal. I also support it because it is fundamentally, as the Chancellor has emphasised this afternoon, a deregulatory measure that recognises the rights of non-workers—those who are currently frozen out of the labour market but would be prepared to work if businesses found it easier to take them on.

[Sheila Gilmore (Edinburgh East) (Lab)]

We are being asked to accept that all small businesses that might take on employees have as their first consideration the possibility of being faced with an industrial tribunal, but, of course, if they are good employers, that is most unlikely to happen. Surely, the fact that they cannot sell their products if there is no demand for them because so many people are unemployed or feel at risk of unemployment, rather than whether they might be faced with an industrial tribunal, is the most important consideration for an employer in deciding whether to take on another employee.

[Michael Fallon]

Employers in my constituency tell me that they will do almost anything to avoid taking on any single additional member of staff. The hon. Lady has to recognise that the number of cases jumped to a quarter of a million in 2009-10. I welcome the change.

I hope that there might be agreement across the House on my next point. The two things that seem to be missing at the moment in our quest for growth are cash and confidence. I fully support what the Government are doing to encourage bank lending. It beggars belief that there was no agreement in place with the banks to stimulate lending to small businesses before the Merlin agreement was concluded this year. I support that agreement, but I also share the scepticism of the Chancellor and the former Chancellor about the stimulus that the first round of quantitative easing may or may not have given to bank lending. The jury seems to be out on that, but what it does seem to have stimulated is inflation. The Bank now admits, I think, that it may have added between 0.75% and 1.5% to consumer price inflation. Two years ago, consumer price inflation was 1.1%, whereas today it is four times that. I hope that the Bank will be mindful, if there is an inflationary effect, that inflation is already higher than we would like. If there is a squeezed middle, inflation is doing quite a bit of the squeezing, and I hope that the Bank will not forget its core task of getting inflation back on target.

In the end, confidence is the key. I hope that the Government will do everything that they can to back the companies that are successful, and to learn from their success.

[John Mann]

Will the hon. Gentleman give way?

[Michael Fallon]

I will not, if the hon. Gentleman will excuse me.

I visited a small business in my constituency that I want to tell the House about. It is called Rotosound and—I say this for colleagues who play guitar or other stringed instruments—it is the prime maker of guitar strings. It sells them not only throughout the United Kingdom, but to 60 countries around the world, and it is one of our great success stories. It sold guitar strings that were used by Jimi Hendrix, The Who and many other bands. It sells them to China, which could quite easily make its own guitar strings, probably more cheaply. People in China choose to buy our guitar strings because they are associated with one of our most successful industries—popular music—and because they are British. We need to distil the essence of successful exporters such as that company. The Government need to find the secret of those companies and do everything possible to back more of them if we are to deliver the jobs that our young people need.

It is clear from the debate so far, and certainly from the Chancellor’s speech, that only this Government can help to deliver the growth that the economy needs by laying the proper foundations for our fiscal consolidation, so that we get the modern economy that we need growing successfully again.

15:51

[Mr George Mudie (Leeds East) (Lab)]

I am delighted to see the Chancellor still in his place. Oh, he is just going. I have that effect on him. I think he has heard enough in the previous four speeches, three of which were by members of the Treasury Committee—its best members; the rest are coming now. The last four speeches were very thoughtful, in contrast with what happened when the two Front Benchers had a go at one another. The public must see that as the Chamber at its worst; it was described as vaudeville. That is not the fault of the individuals concerned; it is the way this place is.

Following on from the speeches of the Front Benchers were speeches from the former Chancellor, my right hon. Friend the Member for Edinburgh South West (Mr Darling); the Chairman of the Select Committee; the hon. Member for Dundee East (Stewart Hosie), who represents the seat in which I was born; and my good friend from the Treasury Committee, the hon. Member for Sevenoaks (Michael Fallon). They were very good speeches, but that contrasts with what we heard before them, which is sad, in a way.

Two kinds of people watch the parliamentary channel during the day. There are people who will find the Front-Bench speeches lovely, because they are party animals of either party, and they like the cut and thrust, but there are also 100,000-odd additional people who are, or could be, looking at that channel: those who, in the last year—in the last quarter or month—have lost their job. Almost a million youngsters between 16 and 24 are out of work; they could be watching that channel, hoping that they will see that action will be taken to get them a job. They will have been despairing, until the last four speeches.

The hon. Member for Sevenoaks said that he saw some common ground. I think that there is some, inasmuch as whatever the bluster, something is clear after 15 months: cutting the deficit at the speed first suggested, backed up by a lack of a coherent growth policy—there was no growth policy; a document was hatched and brought forward six months later as an autumn statement—meant that the people watching knew that we were going to have a hard time. This debate will be an achievement if there is any acceptance in the Chamber that we cannot do what we have been doing for the past 15 months, but must do something additional—something different—because what we have been doing is not working. There are signs of that. The fact that the Chancellor went to the Bank of England and asked for credit easing to be done through the Bank, which was refused, and the fact that he is now taking the steps to do it himself, is good—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. Will the hon. Gentleman please make his comments through the Chair?

[Mr Mudie]

Shall I start again, Mr Deputy Speaker? You have put me off. Can you remind me where I was?

The Chancellor was turned by the Governor, but he was treated very well by the House because he had spent half an hour saying that he would not spend money. He now has the job for the next two months, until the autumn statement, of making a reality of credit easing, which means that because the Governor will not do it from the Bank of England, it will have to be done by the Government through public expenditure. And that, from a man who was saying that there is too much public expenditure and the only way is to cut, is a major achievement and a major philosophical breakthrough.

There are clear signs that the Chancellor realises that he boxed himself in. It was described three or four months ago on a radio programme as flexibility—“I have flexibility in my programmes”. That would give him the ability to move off plan A, but it is now clear that he is moving off with a vengeance because he sees the danger. When we in the House speak about growth, that means a lot to politicians, but the ordinary person does not realise that it means their job, the security of their home and their income. If the Chancellor is moving on that, it is very good.

I shall put three suggestions on the table for the Chancellor. First, he could reconsider the disastrous decision to abolish regional development agencies and the disgraceful decision to give the local enterprise partnerships that he set up in their place less money, no staff, no powers, no authority and no influence. They have pulled together in every area in the country schemes that have been presented to Lord Heseltine to filter out and put forward for funding. As only one scheme has come from each area, there is a whole list of good schemes sitting on the table that could be put into operation.

Secondly, when we speak about infrastructure, we invariably go to roads. The key, however, is housing because it triggers so many additional jobs and so much additional expenditure. There is one thing the Chancellor could do without spending any money. I know there is a balance. An average two-bedroom house costs £160,000. To get a mortgage requires a deposit of £32,000. Need we look any further to understand why youngsters are not buying houses? I know we have to protect people from being irresponsible, but such a value-to-loan ratio has knocked house purchase off the table. As we are not building social housing, it is a real block. Perhaps the Chancellor could speak to the Financial Services Authority and to the banks and say, “Ease off and look at each case on its merits.”

Finally, during the 1980s recession we had some very good community programmes—youth training schemes and so on. They were sometimes derided but they kept youngsters at work and gave them some self-belief and purpose. Youngsters got up and turned up on time. The schemes prepared them for work and kept them intact as individuals. In Leeds we had 2,500 places and we did enormous work across the city with unemployed people who, to this day, pay tribute to the fact that such schemes kept them going when they would have disintegrated as personalities if they had not had that discipline and chance. I should like the Chancellor to think about those.

15:59

[David T. C. Davies (Monmouth) (Con)]

I confess that as I listened to the shadow Chancellor this afternoon, I almost felt a growing sense of admiration for the sheer effrontery of the man. This man who came to deliver a lesson to the Chancellor was personally responsible for much of the economic mess that the country now finds itself in. He, of course, is no longer in his place, but I wonder whether I might give a quick economic history lesson to those Members on the Opposition Front Bench who have hung around to listen to the debate.

In 1997 this country had a national debt of £350 billion and was basically spending what it earned. By May 2008, well before the collapse of Lehman Brothers and the banking problems, the national debt had already increased to £629 billion and the Government, during the boom times, had run a deficit of around £30 billion a year. I am yet to hear any Opposition Member explain why, when the country was booming, they spent £30 billion a year more than the country was taking in taxes. Once we hit the banking problems, which the previous Government successfully blamed all the economic problems on, the debt skyrocketed to £1 trillion.

Of course, even that is not the full story, because many sensible economists claim that the national debt is at least twice as large, as the figures used do not take into account the PFI contracts used for all the schools and hospitals that the previous Government built but never paid for. It does not take account of the liabilities for organisations such as Railtrack and Metronet, and of course it takes no account of public sector pensions. The reality is that we must now deal with a debt of at least £1 trillion and the deficit of £160 billion that we inherited.

Opposition Members like to blame it all on the banks. “It was all the fault of the wicked bankers”, they say. I have done a little checking with the House of Commons Library, and as far as I can ascertain the banks received £100 billion. That money was given out not simply in cash, but in shares and the rest of it, so a lot of it might come back to us. If we take the best-case scenario for the national debt, which is £1 trillion, rather than the £2 trillion suggested by many economists, and the worst-case scenario for the £100 billion that was given to the banks, which is that nothing will come back, even then that money accounts for only 10% of the national debt. What about the other £900 billion? When will the Opposition start accounting for that?

One trillion pounds is a lot of money. I was thinking about it earlier and trying to put it in perspective. If we were to create a graph and used 1 cm to show £1 million, it would have to stretch all the way from here to Highgate cemetery to show the scale of the wanton spending for which Opposition Members are responsible—I do not know whether it is relevant, but that is the burial place of Karl Marx.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

I wonder whether the hon. Gentleman knows what the public sector debt was in 1997 and in 2007 before the recession.

[David T. C. Davies]

Yes, in 1997—

[Debbie Abrahams]

Does he know what it was as a percentage of GDP?

[David T. C. Davies]

Has the hon. Lady finished now, and may I continue? I am always fascinated by the fact that comparisons are made between levels of debt as a percentage of GDP. I will certainly give way again if someone can explain why we compare national debt with GDP. Why do we not do what any company would do and compare it with revenue? If we look at a comparison with 2010, when this Government took over and when the national debt was £1 trillion, we will see that the revenue coming in was £520 billion. The country had a national debt that was almost twice the revenue it was taking. Anyone who has run a company—most Opposition Members have not, but I have—will know that any company that found itself in such a situation would be declared bankrupt immediately.

[Kwasi Kwarteng]

Will my hon. Friend remind the House why the previous Labour Government ran a deficit for nine consecutive years from 2001 to 2010, despite having a boom?

[David T. C. Davies]

My hon. Friend asks a very good question. They managed to come up with an excuse after 2008, following the collapse of the banks, but as I said earlier, I am yet to hear an answer on why they ran a deficit from 2001 to 2008. Perhaps we will get one later.

What I did hear from the shadow Chancellor was some rather mealy-mouthed insults directed towards my right hon. Friend the Chief Secretary to the Treasury, who had a proper job outside politics and Government, as I did, which the shadow Chancellor seems to think is worth mocking him for. My right hon. Friend was not the man who was responsible for the £1 trillion-worth of debt, for selling gold at a fraction of the price, or for running up deficits in boom years. [Interruption.] I will not say anything about the euro at the moment, but there are many Labour Members who were urging us to the join the euro during those times and are now trying to give us a lesson in economics. I notice that they have all now gone very quiet.

The reality is that Labour Members never, ever learn their lesson. For them, it is not a case of plan A or plan B; there is only one plan: “Let’s tax people as highly as we can, and when we’ve finished squeezing every penny out of them, we’ll borrow more money.” They do not remember the words of one Labour Chancellor of the Exchequer during a Labour conference: “Comrades, you may think that we can tax and spend our way out of a recession, but I tell you that is no longer an option.” They still have not learned the lesson.

Clement Attlee failed in the 1940s when he tried to build his welfare state on the back of American war loans. There was Harold Wilson in the 1960s telling the public that the pound in their pocket was worth the same when he was rapidly devaluing it. Then there was Jim “Crisis, what crisis?” Callaghan, who, just like his successors, brought the country to the brink of utter bankruptcy, and did not even seem to think that he had done anything wrong. It was 18 years before they got another chance, and they have done exactly the same thing again: tax and spend, borrow and spend, just keep on doing it and do not worry about it.

I am glad that we have a Government who are not going to go for the easy option, which would be to borrow a whole load more money now in the hope of winning an election, which is exactly what Labour Members were doing for a couple of years. We are going to take some tough decisions, and that means getting our books in order. Unlike the shadow Chancellor, I know, having run a small family haulage business, that one cannot carry on spending more money than one gets indefinitely. I welcome the fact that the Chancellor is going to encourage real growth by making it easier for businesses to take people on and not have to worry about employment tribunals, which anyone who has run a small business does worry about all the time because of the number of spurious claims.

[John Mann]

Rubbish!

[David T. C. Davies]

I wonder whether the hon. Gentleman has ever had any experience of running a business or dealing with spurious employment tribunals—I very much doubt it.

I am also glad that the Chancellor has recognised that reducing our carbon emissions at a time when the economy is facing problems is not necessarily the wisest thing to do, particularly when the Government are now having to accept that our winters are getting colder, that more people are dying through cold than through heat, and that the link between carbon dioxide and global warming is not quite as clear-cut as many people say.

[John Mann]

rose—

[David T. C. Davies]

I will not give way again, because I have done so twice and I do not want to cut myself off.

I congratulate the Chancellor and all his colleagues in the Conservative and Liberal Democrat parties and urge them to stay the course, to ensure that we spend what we earn, and not to listen to Labour Members or take any notice of people such as the former Prime Minister. Even he did not seem to know the difference between debt and deficit, because anyone who looks at the YouTube video of him abusing Mrs Duffy and calling her a bigot will notice that halfway through he said, “We will cut the debt in half.” Did he not know the difference between debt and deficit, or was he planning much deeper cuts than the coalition Government? Perhaps someone will answer that question.

All Back Benchers on this side of the House are supportive of the Government because we recognise, as we always have, that it is not possible to carry on spending money that one does not have because that merely creates a bigger problem further down the line for our children. That is why I urge my colleagues to stay the course.

16:08

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

As ever, it gives me great pleasure to follow the hon. Member for Monmouth (David T. C. Davies), who talks about learning lessons. Following the erudite economic contributions that we have heard from many hon. Members, I am going to talk about the real lessons of human life in my constituency.

First, let me give some numbers. Over the past year, claims for jobseeker’s allowance in London increased by 10%, compared with the UK as a whole at 8%. Those figures are pretty bad, and today’s unemployment statistics underline the general trend. In my constituency, the figure increased by 18%. If one looks more closely, it gets worse. The number of claimants under the age of 24 increased by 18.1% in the past year, and for someone who is over 50 the outlook is bleak. The increase in the number of claimants in that group was 29.2%. That is right—nearly a third more over-50s are seeking work than a year ago.

I will focus on people and their lives, and on the families who are affected by this Government’s policies. About one in three residents in the borough of Hackney, which I represent with my hon. Friend the Member for Hackney North and Stoke Newington (Ms Abbott), are under the age of 24. Therefore, as well as the percentage increases, a significant number of young people in both constituencies are affected by the Government’s reckless programme.

[Andrew Bridgen (North West Leicestershire) (Con)]

Will the hon. Lady explain how abandoning our deficit reduction plans, losing our triple A credit rating, and forcing up interest rates to UK plc, homeowners and business will lower unemployment?

[Meg Hillier]

That question demonstrates the detachment of this Government and their Back Benchers from the reality of human lives. If the hon. Gentleman will let me develop my argument, I will point out that there are real challenges for people. There is an alternative plan, which my right hon. Friend the shadow Chancellor and his colleagues have laid out, and I back it.

I have met young people who have already been made redundant in their early 20s and others who have done everything that the Government have asked of them, such as working hard at school. Our borough has seen huge improvements in schools and education, and its results are improving. Our young people are increasingly going to university, which was pie in the sky for many young people when I was first selected for my seat. And still, there are no jobs. We risk having a lost generation, although not like the lost generation that the hon. Member for Sevenoaks (Michael Fallon) spoke about, because we made great strides in government, although there is still more to do on skills. We risk a lost generation of young people who have achieved a lot and still cannot get a job.

[Ms Diane Abbott (Hackney North and Stoke Newington) (Lab)]

Does my hon. Friend agree that one of the most alarming consequences of the Government’s economic policies for those of us in inner-city communities is how hard the cuts hit the public sector and women workers in the public sector? Particularly in inner-city London, disproportionate numbers of public sector workers are black and minority ethnic, and there are no private sector jobs for them to go into. Those people are often the head of their household and the only earner in their household. They are the sacrifices of this misconceived economic policy.

[Meg Hillier]

I could not put it better than my hon. Friend and I will not try. She is absolutely right.

Young people who have never worked are now desperately seeking even unpaid work experience. What have this Government done in response? They have cut the future jobs fund so that there is no more chance of employment and no more try-before-you-buy for employers. They have cut education maintenance allowance and increased student tuition fees. Just as young people in Hackney are emerging from school, ready and qualified for university, they are losing the help that they had.

The cuts programme is so deep and so fast that it gives no hope. It does exactly what my hon. Friend the Member for Hackney North and Stoke Newington said: it cuts the jobs that were providing for so many households in my constituency and keeping our local economy going.

Although the Chancellor is not in his seat, let me tell him about real people. Last week, I met a 16-year-old who said to me, “I really want a Saturday job because I want to grow from a boy into a man and this will help me.” He also told me that he wants and needs to contribute to his household’s increasingly squeezed income. He is losing the education maintenance allowance that he would have been entitled to and he is very worried.

There is the sixth-former who used her education maintenance allowance to top up the family’s electricity key on a Thursday so that she could keep the lights and heating on until the end of the week for the basics of study and existence. There is the teenager who attended school on alternate days because he and his brother had to share a pair of school trousers. Thanks to EMA, he is now at university, where he has escaped from his chaotic family background and is ready to succeed. I hope that there will be a job for him when he leaves.

There is the woman who is working to bring up her children and is using an expensive prepay meter key.

[Kwasi Kwarteng]

Will the hon. Lady give way?

[Meg Hillier]

I am afraid that I will not.

That woman told me that she uses the prepay meter key because of her fear of a large quarterly bill at the end of the autumn, even though she knows that it costs more. She is doing what the Government tell her to do. She is a single parent with four children who is working to support her family, but she lives in fear of the bills every day. There is the man who came to my surgery on Monday. He has a job offer, but he faces the choice between a job and a home because of the Government’s short-sighted approach to housing benefit.

Where are the private sector jobs? In my constituency and that of my hon. Friend the Member for Hackney North and Stoke Newington, most small businesses employ fewer than six people and they are struggling. I have been up and down my high street many times since the events of 8 August, but it is not just those events that have caused problems. Businesses are struggling with footfall and because people do not have disposable income to spend. They are worried about what will be down the road.

The Federation of Small Businesses has been very critical of the Government’s approach, as my right hon. Friend the Member for Morley and Outwood (Ed Balls) indicated. Businesses on the high street need quantitative easing, including those that are being incubated by entrepreneurs in my constituency. The Prime Minister is very fond of talking about creating a silicon valley when it suits him, but those high-street businesses are exactly the sort that could be creating jobs for young and older people in my constituency. However, they risk being throttled at birth, or if they do survive—I wish them well and hope they do—they risk not growing at the rate that they could with the right support from Government.

[Richard Fuller]

Will the hon. Lady give way?

[Meg Hillier]

I am afraid I will not.

Families are being squeezed. Prices are going up, with food prices having increased by 6.1% in the past year. For those who drive, petrol has gone up. Energy prices have gone up, VAT is at 20% and we are seeing a huge hike in fare prices thanks to the Tory Mayor of London. If people have a job, they are worried that they will not have it in future, and they are worried because they will not be getting pay rises. Families in my constituency have nowhere to go to get the extra money: not for them the easy credit that is available to many or the bank overdraft that is available at the end of a phone call; not for them the rich family member who can help them out or a cushion that they have saved over years of work, because they have been living a difficult existence as it is and are now squeezing until the pips squeak. They cannot squeeze any more out of their household budgets.

This Government are cutting too far, too fast, and it is not working for families, for young people or for businesses. It is not working at all, nor, sadly, are far too many of my constituents.

[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. This debate is very popular and I want to accommodate as many Members as I possibly can, so the time limit is being reduced to six minutes, with the usual injury time for two interventions.

16:16

[Jake Berry (Rossendale and Darwen) (Con)]

I am delighted to see that the reshuffle of the shadow Cabinet has had a real effect on its sense of humour. Government Members are of course used to the fake outrage all the time, but the terms of the motion suggest that the Opposition seem to have discovered irony.

I will not support the motion, because it demonstrates the Opposition’s fundamental failure to have any credible economic policy whatever. This five-point plan is a nationalised Ponzi scheme on steroids. Even in itself it would add £3.1 billion to our deficit. The Opposition probably do not understand what a Ponzi scheme is, but they should look at their own manifesto. People in my constituency do not believe that the way out of debt is to take on more debt. They do not believe that the way to reduce their personal liability is to spend more money.

[Alison McGovern]

The hon. Gentleman is incorrect, because if there were investment it would not be a fake Ponzi scheme—the assets would be real, unlike in an actual Ponzi scheme.

[Jake Berry]

I never said it was a fake Ponzi scheme, I said it was a real Ponzi scheme. That is the basis of the Opposition’s entire policy.

The markets believe in our plan and want us to stick to plan A: actually, so does every hard-working family in my constituency. They are struggling with personal loans and do not want interest rates to go up. Like so many of us, they are struggling with mortgages and cannot afford that to happen. The Prime Minister has offered real leadership throughout this, and the Chancellor of the Exchequer has been honest. That is in stark contrast to the Labour party’s constant line of “too far, too fast”.

What is the Opposition’s alternative? This five-point plan is simply too little, too late. They believe, “Why repay borrowing today when we can have business as usual and bankrupt Britain tomorrow?”

[Andrew Bridgen]

Does my hon. Friend agree that, like a compulsive gambler believes that one more big bet will solve all his problems, the shadow Chancellor and the Labour party believe that one more credit splurge will get us out of a debt crisis?

[Jake Berry]

I do, and for all addicts the hardest thing to do is admit that they have a problem. When this Government came to power in May 2010, we admitted that we had a problem with debt. Even if we fall off the wagon temporarily, we know we have that problem and so we get straight back on it. The Labour party has not even admitted it—it thinks it gave us a golden economic inheritance.

[Chris Leslie (Nottingham East) (Lab/Co-op)]

Can the hon. Gentleman tell us by how much unemployment has risen in Rossendale and Darwen in the past 12 months?

[Jake Berry]

I am sure that the hon. Gentleman will provide me with the figures—

[Rachel Reeves (Leeds West) (Lab)]

Do you not know?

[Jake Berry]

I do know. However, I can guarantee my constituents one thing, and one thing only: unemployment has not gone up by as much as it would have done if we had had Labour’s Ponzi scheme.

[Several hon. Members]

rose—

[Jake Berry]

I am sorry, but I will not give way again because I am running out of time and I have many points to make.

Let us look at the facts. Back in May 2010, when we came to power, we had 0.1% less debt than Greece as a proportion of GDP. Labour Members can criticise us and say that making cuts damages growth, but let us look at their alternative. Their alternative—too little, too late—would mean, as in Greece, a 15% pay cut for every doctor, nurse and policeman, and every public sector worker; and a cut of up to 40% in pensions. That is what too little, too late means.

[Emma Reynolds (Wolverhampton North East) (Lab)]

Will the hon. Gentleman give way?

[Jake Berry]

I am sorry, but I will not give way. I want to make progress.

The Labour party opposes the Government’s public spending cuts, but its alternative—the too little, too late alternative—would mean that our economy, like Greece’s, would shrink by 5% this year, and that mortgage rates would rocket. One of the things that Government Members are most proud of is our desire and aspiration to increase the tax threshold to take many of the lowest paid in our society out of tax altogether. Had we followed the too little, too late approach, as Greece did, we would have had to cut our tax-free allowance by 50%.

The Chancellor has been frank about the choppy waters ahead, yet businesses in my constituency of Rossendale and Darwen still strive to succeed. Businesses such as J&J Ormerod, the largest employer in my constituency, B&E Boys, Crown Paints and WEC engineering, are doing their best to manufacture proper products and to rebalance the UK economy, despite tough times. Those businesses know about the Labour party’s economic illiteracy. That is why, before the general election, some of them signed a letter opposing Labour’s jobs tax. Businesses in my constituency will not forget that the previous Government were the enemy of enterprise and industry, and that Labour is the party of the jobs tax.

[Rachel Reeves]

Will the hon. Gentleman give way?

[Jake Berry]

Sorry, I will not.

How ironic it is that the Opposition motion calls for a cut in national insurance. That is too little, too late, and business in my constituency knows that the Labour party is not the solution but, in fact, the problem.

[Rachel Reeves]

Will the hon. Gentleman give way?

[Jake Berry]

Sorry, but I will not.

Looking at today’s job figures, including the increase in unemployment in my constituency—

[Rachel Reeves]

The increase was 29.2%.

[Jake Berry]

The Opposition Front Bencher says from a sedentary position that the increase is 29.2%. I have real sympathy for those experiencing the increase in unemployment. People are facing an unbelievably tough time. These are uncertain times for all of us. However, if we are to have a successful economy in Rossendale and Darwen, and if we are to get people back into work, we must keep low borrowing rates and support the new enterprise zone in Lancashire, which will create jobs. Our manufacturing businesses are not thriving, but they are still growing. Companies such as Linemark in my constituency, which has just won the Queen’s award for enterprise, are growing through innovation.

The key to our success in east Lancashire in business, jobs and families is low interest rates, so we must stick to plan A. We must enable jobs and growth in Rossendale and Darwen.

16:25

[Ian Mearns (Gateshead) (Lab)]

In March, the Government launched their much-heralded plan for growth, and in a document signed off by the Business Secretary and the Chancellor of the Exchequer, the foreword read:

“This Plan for Growth is an urgent call for action. Britain has lost ground in the world’s economy, and needs to catch up. If we do not act now, jobs will be lost, our country will become poorer and we will find it difficult to afford the public services we all want. If we do not wake up to the world around us, our standard of living will fall, not rise.”

Those are fine words, but the Government’s actions since have only inflicted more damage. Since May last year, they have systematically dismantled and reduced the UK economy’s capacity. Ideologically driven by a quest to reduce the public sector, they have relentlessly pressed one single policy button—deficit reduction. In the northern region and my constituency, the Government’s policy is looking very much like a scorched-earth strategy.

While imposing draconian and disproportionate spending cuts, which this year alone have reduced grants to the 12 local authorities in the north-east of England by an average of £84 per head of population—compared with only £5 per head of population in the 12 least-deprived local authorities in the south of England—the Government have reduced resources for regional development in our region by at least two thirds. Before the election, the Prime Minister identified the northern region, along with Northern Ireland, as an area that would require special support to rebalance its economy—we all know what that “special support” really resembles. From my perspective, it looks like the support given to a hanged man—a rope.

[Mrs Jenny Chapman (Darlington) (Lab)]

I must correct my hon. Friend. The Prime Minister said—on “Newsnight”, I think—that the north-east was over-dependent on the public sector and would be hit the hardest.

[Ian Mearns]

I was being kind to the Prime Minister, but he did actually use the words “rebalance the economy”. One North East, the regional development agency set up by the previous Government, is being abolished and replaced by as-yet-unfunded and as-yet-totally-impotent local enterprise partnerships in the north, including in Teesside.

[Richard Fuller]

The hon. Gentleman says “the Government this” and “the Government that”, but if we are talking about jobs, he ought to be talking, as I am sure that he is, to small business owners in his constituency. In those conversations, how many of them have said that they would put at risk low interest rates in this country to pursue some of the policies in the five-point plan, and how many said that they would welcome the job tax that the previous Government said that they would impose on businesses up and down the country?

[Ian Mearns]

Many of the businesses that I speak to in areas such as the Team Valley trading estate, which employs about 20,000 people in the private sector, complain about the pace and depth of the Government cuts. They are impacting on their order books because many of them provide for the public sector. Unemployment in the region now stands at 142,000, which means that 11.3% of the working population in the north-east are now unemployed. The only conclusion that we can draw from the rationale of the parties in government is that, for them, unemployment in the north-east is a price worth paying.

[David Mowat (Warrington South) (Con)]

The hon. Gentleman is making some powerful points about the north-east and the gap in gross value added per head between it and London and the south-east. However, does he accept that over the past two decades that gap reached its widest in the last year of the previous Government?

[Ian Mearns]

I was critical, in many respects, of the previous Government’s regional development policy, and I admit that I never understood the rationale for spending regional development money in the south-east when it would have been better spent in areas such as the north-east to rebalance the British economy. Having said that, however, I am not going to criticise my colleagues in the south-east—they have voters as well.

The regional growth fund, which stands at only £1.4 billion over three years, is being used to plug the gap left by the RDAs, which helped significantly in areas such as the north-east and collectively had a budget of £1.4 billion every year. In areas such as the north-east of England, the RDAs were vital. So much for the words of the Deputy Prime Minister last June, when he said that the regional growth fund would

“make a real difference to companies during difficult times.”

We have yet to see a single penny of the regional growth fund being spent in any company in the north-east of England. Oh, what it must be like to have responsibility for Government policy without having any real influence over it! The Secretary of State for Communities and Local Government said that he did not want to

“strangle business with red tape,”

but wanted “urgent action,” which was needed to

“rebuild and rebalance local economies…across the country.”

What we are actually seeing in response is the infliction of savage cuts that are sucking money, spending power and potential demand out of the economies of regions such as the north-east.

The north-east is part of England and part of the United Kingdom, but we are being treated disproportionately badly by this Government’s economic policies. If they ever get round to paying out money from the regional growth fund, we will frankly struggle to notice the impact because of the unemployment that already exists in the north-east after the deficit reduction strategy. The regional growth fund is taking on the appearance of a pathetic fig leaf that cannot hide the stark truth that the Government do not have a real growth strategy for Britain or a region such as the north-east of England. As we know, the local enterprise partnerships have no start-up funding, no core funding, no guaranteed access to the regional growth fund and no new legal powers. The case against the Government’s policy in the north has been eloquently set out by the Smith Institute of all people—hardly an organisation renowned for its left-leaning attitudes towards public policy—in its report “Rebalancing the economy: prospects for the North”.

The Government’s plan is simply not working, but is inflicting enormous damage on the economic capacity of the north. It is stifling and strangling our economy, not rebalancing it. Oblivious to the consequences of their actions, the Government press on blindly with plan A: deficit reduction. Tens of thousands of jobs destroyed, 1 million young people unemployed, the poorest and most vulnerable in our communities paying the most for the cuts—it is quite clear that we are not all in this together. Over the past 17 months the Government have been absolutely clear that deficit reduction has been their priority above all other considerations. Everything that has been said by the Chancellor and his supporters in the Chamber this afternoon adds to the one simple sentence: “It’s a price worth paying.” To those in the coalition Government, Tory and Lib Dem alike, I ask this. Unemployment of 2.5 million, with 1 million unemployed people under 25—is it a price worth paying? I do not think so.

16:32

[Gavin Williamson (South Staffordshire) (Con)]

It is a pleasure to be able to speak in this debate, but sometimes I listen to Opposition Members and just cannot understand where they have been for the last 10 or 12 years. If my constituents have been listening to some of the Opposition speeches, they will be equally shocked. They will remember a Chancellor who once used to speak of prudence and financial stability creating an economy where the books were balanced. Well, prudence was jettisoned a long time ago and it is certainly not a friend of the new shadow Chancellor. Until Opposition Members understand that they have to have a sensible, balanced economic approach, they will never have credibility with the people of South Staffordshire or, I am sure, the people of this country.

We often hear Opposition Members talk of a lost decade of low growth, low employment and low private sector employment. Well, we had a lost decade—a lost 13 years—in the west midlands between 1997 and 2010. You probably often sit there, Mr Deputy Speaker, wondering how many private sector jobs were created in the west midlands between 1998 and 2008. You were probably thinking it was perhaps 250,000—in those halcyon days, when house prices were booming and the economy was growing—but I am afraid to say that you would be wrong if you thought that. If you thought that the figure was 100,000, I am afraid that you would also be wrong. In fact, there was not a single net private sector job created between 1998 and 2008 in the west midlands. We saw a decline of more than 60,000 private sector jobs in the region.

[Chris Leslie]

Can the hon. Gentleman tell us whether unemployment has risen or fallen in his constituency since he was elected?

[Gavin Williamson]

The hon. Gentleman makes an interesting point. Between September 2010 and September 2011, 74 additional people became unemployed in my constituency. That is a tragic situation, but this Government are doing something about it. Unlike the previous Government, who did little or nothing for my constituency, this Government are delivering. I will explain how. We are out there creating and delivering jobs, and making things happen in South Staffordshire. Already, thanks to the actions of this Government, we have been able to save 400 jobs there by ensuring that the investment was delivered for Moog, an important employer in my constituency, which is relocating to a new factory on the i54 business park.

What is more, this Government are committed to delivering more jobs, not only in my constituency but right across the west midlands. Through the Government’s actions, we have secured an enormous investment of £350 million from Jaguar Land Rover to build a new engine plant on the i54, which has been designated an enterprise zone.

[Emma Reynolds]

I live about 300 metres from the i54 site. Will the hon. Gentleman admit that, were it not for the Labour Government and the regional development agency, which decontaminated the site, invested in it and made it a strategic site, we would never have had that investment in the first place?

[Gavin Williamson]

I thank the hon. Lady for making that point, but let me explain something. Having run a manufacturing business for many years before entering the House, I quickly discovered that when considering relocating a factory to a new site, two core ingredients are needed. They are electricity and gas, but no funding had been provided by Advantage West Midlands to install either on that site. If that is far-sighted policy from a regional development agency, I do not think it is particularly great.

The investment from Jaguar Land Rover will create 750 jobs in my constituency and the wider area, as well as many thousands more. This country is now investing in manufacturing again. It is no longer a country with a declining manufacturing base, in which manufacturing declined from 21% to 12% of our gross domestic product. We are now ensuring that that percentage will grow, because that is what we need. I believe that this Government will deliver that.

This is not just about encouraging manufacturing; it is about encouraging the service sector and all the other sectors. We are supporting small businesses as well as big ones. We have already seen a massive increase in the research and development tax credits available to small businesses. I recently visited Squire, the makers of some of the finest padlocks in the country. I suggest that Members purchase one for their garden shed. The R and D tax credits introduced at the last Budget for small and medium-sized enterprises are encouraging businesses such as Squire to invest in research and development and in innovation to provide them with a secure, prosperous and healthy future.

Those are the initiatives that South Staffordshire needs, and that the whole country needs. The Government have a difficult legacy to deal with, thanks to Labour, but they are helping Jaguar Land Rover, Moog and all those other businesses through the creation of enterprise zones and the lowering of corporation tax. They are supporting those businesses at every level, and that is what will deliver growth for this country.

16:39

[Sammy Wilson (East Antrim) (DUP)]

I will not tax your brain, Mr Deputy Speaker, by getting you to guess about job creation or anything like that; I would like to make just a couple of points.

First, I sometimes approach a debate such as this with a degree of unease. There is always a tendency either to pretend that there is no problem because the existing policy has to be defended or else to magnify the existing problems and in doing so to have an impact on confidence. One thing I have found from speaking to business people in Northern Ireland is that although we are going through difficult circumstances, which everyone recognises, there is no point in further impacting on consumer and investment confidence by, through political point scoring, making the situation appear worse. We need to try to avoid that in a debate such as this.

Secondly, I have looked at the statistics on Northern Ireland and found that we have seen no growth in the economy over the past 24 months. We have had an increase in unemployment and, of course, given our heavy dependence on the public sector, the public spending cuts of £4 billion over the next four years—40% of the capital budget—are bound to have a deflating impact on the economy.

In listening to today’s debate, to the Chancellor’s reaction and to some of the Opposition’s proposals, we have to consider whether the rigid battle lines that have been drawn are of benefit to the economy in the long term. I accept what the Chancellor has said today—there is considerable risk in changing position—but any economic strategy is bound to carry risk with it, as it involves trying to project and look into the future on the basis of many different variables, such as how markets will react and what will be the impact of a decision. We do not have perfect knowledge about those things, so sticking rigidly to the current plan carries a risk.

We do not know how the markets are going to react to the increased borrowing that will be required as tax revenues fall and spending on unemployment and other benefits rises. Currently, the markets seem prepared to accept that there might well be an increase in the deficit because of what is happening, but that the Government are still on plan to reduce the deficit. Where is the tipping point when the markets begin to say, “Do we really have a credible plan?” Equally, if we go down the path of increasing spending and reducing taxation, at what stage will the markets say, “You are deviating from the plan”?

One thing that I suppose has come out of the debate so far—at least from the IMF, the OECD and even some of the credit agencies—is an acceptance that there can be some flexibility. Even the Chancellor is beginning to accept that demand in the economy needs to be stimulated. I suppose his attitude and approach to quantitative easing is an indication that he sees demand stimulated by monetary policy but equally that good fiscal policies and ideas may also be considered as a means of trying to stimulate growth. I am not so sure, when I look at what is happening to bank lending in Northern Ireland, that quantitative easing is having an impact. The British Bankers Association has published its quarterly figures. From the last quarter of last year to the second quarter of this year, bank lending to small businesses fell by 30% in Northern Ireland. With the Chancellor telling us that there is sufficient liquidity in the banking system, one has to ask whether simply making money available is going to be the answer.

Some fiscal measures have been suggested here today. It has been suggested that we need not increase spending and reduce taxes to create extra demand. Instead, we could direct extra spending towards the activities that create the biggest multiplier effect—for instance, spending on housing and reductions in VAT, whether for extensions to houses or for the tourist industry. There are measures that do not cost a penny, such as reducing regulation. I welcome the Chancellor’s announcement that he will not stick to the carbon reduction targets. As one who voted against the Climate Change Act 2008, I am pleased to observe that some reality is now entering that debate. Why should we impose a 40% increase in energy costs on our industry when that is not being done elsewhere, with the aim of reducing carbon emissions into the atmosphere and thereby somehow or other affecting the climate?

There are many suggestions to be considered. I believe that the Chancellor has more leeway than he claims, and I hope that we shall see some movement as a result of today’s debate.

16:46

[Kwasi Kwarteng (Spelthorne) (Con)]

I am grateful for the opportunity to speak in the debate.

I am pleased and interested to learn that the shadow Chancellor recognises that the problem we face is an international problem. He spoke eloquently about the deepening eurozone crisis, and also about the prospects for Greece and Portugal, which frankly are not too good. I am also pleased to speak having heard the speech of the hon. Member for Hackney South and Shoreditch (Meg Hillier), who gave a graphic account of the difficulties that we face from the point of view of her constituents. What we have not heard from the Opposition is an admission that they were in any way responsible for the difficulties that we face today. What we have heard, from Members on both sides of the House, is the expression of a desire for a bipartisan approach and a civilised debate, and I am all for that. However, if we are to understand the challenges that we face today, we must understand how we got into this mess in the first place.

It is true that every country in the OECD and in the economically developed world faces similar challenges, but it is not true that those countries managed their public finances as badly as we did in the years between 1997 and 2010. Let us rehearse some of the facts. We entered this period of our national life with a higher deficit-to-GDP ratio than any other OECD country: 12%, when the German ratio was 3.3%. That was a direct consequence of decisions made by those on the Treasury Bench between 1997 and 2010. As my hon. Friend the Member for Sevenoaks (Michael Fallon) pointed out, the then Government ran a deficit in every year between 2001 and 2010—for nine straight years. Even when the economy was booming, we ran deficits of £30 billion a year in 2002, 2003 and 2004. The shadow Chancellor referred to Lord Keynes—

[Emma Reynolds]

Will the hon. Gentleman give way?

[Kwasi Kwarteng]

I should be happy to do so.

[Emma Reynolds]

I should prefer the hon. Gentleman to speak about debt-to-GDP ratios. Does he accept that on the eve of the world recession we had the second lowest ratio in the G7, second only to Canada’s?

[Kwasi Kwarteng]

What the markets were looking at was the deficit. The hon. Lady may remember what happened to the gilt market as her party’s Government were being shunted out. The price of British Government debt rose and yields fell in direct anticipation of Labour leaving power. The markets made their own decision. In the last 18 months, the price of British Government debt—that is, the interest rates that we pay—has fallen. It has managed to remain at the same level, precisely because markets realise that the Chancellor and his team are doing the right thing in tackling the deficit. We have been told repeatedly that if we were to show any relaxation of our deficit reduction programme, the markets would dump our bonds and interest rates would rise, which would cause immense damage to the hon. Lady’s constituents as well as mine.

[Rachel Reeves]

Does the hon. Gentleman accept that before the last general election—between January and May 2010—yields on Government bonds were falling and they have stayed at low rates since the general election? The markets did not know which party would win the election because the campaign was so close. Therefore, the hon. Gentleman cannot argue that those yields were falling in anticipation of an incoming Conservative Government, because nobody knew that.

[Kwasi Kwarteng]

The yields were not falling in anticipation of a Conservative Government, but they were certainly falling in anticipation of the then Labour Government going out. Markets anticipate events—that is how people make money—and the markets had, in their wisdom, decided that Labour would not be re-elected. I assure the House that if Labour had been re-elected, the markets would have dumped British debt and we would be facing a much tougher interest rate environment than we currently face.

I always enjoy listening to the shadow Chancellor’s speeches, as they are very entertaining, and I enjoyed his speech today—I think one Member even mentioned vaudeville, which I think does vaudeville discredit. However, I was staggered by the shadow Chancellor’s assertion that the fact that we have low interest rates is somehow a reflection of our having a weak economy. That was an extraordinary claim. People in my constituency are very grateful indeed that we have low interest rates, because that enables them to pay their mortgage liabilities. It seemed extremely arrogant for a supposedly responsible politician to say on the Floor of the House that low interest rates were a bad thing, which was essentially what the shadow Chancellor was arguing. [Interruption.] He was suggesting that they were a symptom of a weak economy, which is a bad thing.

On the contrary, however, our low interest rates are a signal that the markets have confidence in this Government. They have absolute belief that the current Government are going to deal with the deficit that was created, almost deliberately, by the Labour Government. We in the House of Commons have to understand why this deficit arose, so we can explain that to the country. It was not just handed down to us by some Moses figure—although the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) probably thinks of himself in that way. It was not handed down from on high; rather, it was created by Governments and by the Members who then sat on the Treasury Bench, and it was created for the simple reason that they, in their arrogance, honestly believed that they had abolished boom and bust. We all remember those statements, and it is an arrogant misrepresentation of the past to suggest that they did not think that. The last Prime Minister believed that he had solved the key economic question of our time, but he was wrong, and it is as a direct consequence of his mistake that our Government have had to introduce the policies we are pursuing.

Many people will ask why we do not have a different plan. They will ask: “Why don’t you suddenly borrow and spend more money in the time-honoured Labour fashion?” That would be a road to disaster, however. It would create a massive lack of confidence and lack of credibility in the British Government’s programme, leading to the markets dumping our Government debt and our interest rates rising. It would lead to people in our constituencies having to face higher payments every month. They would be squeezed even more if we were not as focused and committed as we are to reducing the deficit.

I have tried to inject some reality into this debate. We have heard consistent denials from Labour Members, and we have heard no admission of guilt or wrongdoing and no ideas as to how we might get out of the situation we are in. We have also heard no real arguments to attempt to explain why what the last Labour Government did was right. Interestingly, no Labour Member has said in this debate, “We did a marvellous job; we gave you a golden inheritance.” I would grant them more credit if any of them would be bold enough to stand up and say that, but they will not do so. That is because, as everyone in this country knows, Labour is bereft of ideas, and it would be a disaster if we were ever to leave our future in its hands again.

16:54

[Frank Dobson (Holborn and St Pancras) (Lab)]

I recall taking part in a number of debates on the economy before the general election and saying on several occasions that there were four ways to deal with the deficit: by cutting spending; by increasing taxation; through economic growth, which would be the most important way by far; and through inflation, the method that dare not speak its name. Since then we have seen the cuts, we have seen people losing their jobs and we have seen the economy undermined. The thing to remember is that when someone is thrown out of work we lose the output of their goods and services and, on average, they cost us £12,000 in tax not taken in and benefits paid out. We now have the highest jobless total since the one under the previous Tory Government. Some of us—not just Tories—have memories about what went on before.

[Gareth Johnson (Dartford) (Con)]

rose—

[Frank Dobson]

I am not going to give way to anybody because it takes up time from everybody else’s speeches.

VAT has been increased, and that hits the worst-off most. There has also been what is, in effect, a tax increase on everybody who has to commute to work: the massive fare increases that have been pushed through, which are far above the rate of inflation. We have certainly seen inflation. One of the reasons why Governments quite like inflation is that if they borrow £1 and there is 5% inflation, they pay back 95p instead of £1. That is why the Government have not taken any notice of the problems caused by the rate of inflation, but it certainly hits people’s pensions and wages.

As for growth, there simply isn’t any. Growth is needed both in this country and worldwide. Growth was the theme of the London G20 summit. I know that it is very unfashionable to praise the former Prime Minister, Gordon Brown, but the fact is that at that summit, and in the run-up to it, he did more than anybody in the world to convince all the Governments that they had to start investing more in the world economy. I have heard from someone else that it is Sarkozy’s private view that Gordon Brown’s intellect and drive—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. The right hon. Gentleman should refer to the former Prime Minister by his constituency.

[Frank Dobson]

I am sorry, Mr Deputy Speaker. It is Sarkozy’s view that it was the intellect and drive of my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown) that virtually saved the world from a total disastrous slump.

Since then, the new UK Government have joined the backsliders; they are not going for growth, either here or worldwide. They have let the bankers and speculators back in charge, blaming public spending everywhere in the world and blaming public services for what has gone wrong. This Government have been delighted to wheel on witnesses defending their policy, but I ask people to look at who these famous witnesses are. They are the bankers, the financiers and the speculators—the people who caused the worldwide problem in the first place.

About two days before its recent unfortunate fraud case, a very distinguished person from UBS said that we needed austerity for all and then everything would be okay. Unfortunately, the interviewer did not ask, “Are you one of the people who lost £44 billion in the crash?” A couple of days later, someone from Citigroup was advocating austerity for all. Unfortunately, the interviewer did not say, “You are from the company that lost £60 billion in the crash. Why should we take a shred of notice of someone with your track record?” Then, my favourite, Ernst and Young, said that we needed austerity for all, but never mentioned being the auditors of Lehman Brothers. One would think that a period of silence—a decade of silence—would have been appropriate.

Frankly, we have seen that the bankers, financiers and speculators have far too much power in this world. We have the Alice in Wonderland situation where the banks cause a recession; the Greek economy declines; the banks in effect charge the Greeks exorbitant rates of interest; the banks, who created the crisis, then threaten the ability of the Greeks to pay them back, meaning that the Greeks might default; and, if the Greeks default, the banks default. The banks start it off, and in the end might default—and what happens? They do not rely on the private sector or market forces. They come grovelling to taxpayers all over Europe to ask them to bail them out of their stupidity—for that is what their policies are. We hear about social security scroungers, but the worst social security scrounger in the world does not compare to the scrounging banks when they get things wrong.

17:00

[Sajid Javid (Bromsgrove) (Con)]

It is always a pleasure to follow the right hon. Member for Holborn and St Pancras (Frank Dobson). Before I begin, may I, too, congratulate the hon. Member for Leeds West (Rachel Reeves) on her promotion?

I am glad that the right hon. Member for Holborn and St Pancras mentioned Alice in Wonderland, because that is exactly where Labour is. What we have heard from the shadow Chancellor today suggests that it believes that we can solve a debt crisis by taking on more debt. Let us remind ourselves of the position that this country was in when the Government changed 18 months ago. We had a national debt of £940 billion, up from £350 billion when the Labour Government entered power.

The hon. Member for Wolverhampton North East (Emma Reynolds) mentioned the debt to GDP ratio, and in terms of net debt that is at 62% today. She is right that it was lower—it gradually went up as the previous Government came to their end—but she missed out the fact that the markets do not just look at the official national debt but take into account the unofficial national debt. The good thing is that now this Government are in power we have started to have a transparent process to assess what that debt is. Before the market was all based on estimates.

I can tell the hon. Lady that the £940 billion is not even half the story. In fact, it is one third of the story because it represents one third of the total national debt of this country. The whole of Government accounts published in July by the independent Office for Budget Responsibility said that the public pension liability of the UK is £1,100 billion. PFI liabilities increased tenfold over the 13 years of the previous Government to £40 billion according to the OBR. The Office for National Statistics reported in the summer that the cost of financial interventions because of the bank bail-outs is £1,300 billion of additional debt. If we add all those numbers up, they come to £3,380 billion—a mind-boggling number equal to 225% of GDP.

Let us look at the five-point scam suggested by the shadow Chancellor. Four of those five policies would lead to a direct increase in our debt and one, the bankers’ bonus tax, would raise less than the levy that the Government have already imposed. I spent 20 years trading Government bonds. I advised Mexico, Brazil, Indonesia, Russia and Argentina when they were at default or close to default and I can tell anyone who cares to know that the way out of a debt crisis is not to borrow more money. Investors have a choice. They do not have to buy anyone’s bonds. They can look at any country or corporation in the world and there is no way to force those bonds down their throat. That was exactly the point we had reached before the last election and if the Government had not changed, we could very well have been in the same predicament as countries such as Greece, Portugal, Ireland and Iceland.

It is not just our triple A rating that shows that the Government’s policy in dealing with the debt is the right one. It is not just the gilt deals, as my hon. Friend the Member for Spelthorne (Kwasi Kwarteng) mentioned, although our 10-year gilt yield is at 2.6%.

[Andrew Bridgen]

My hon. Friend might recall that the previous Government created £200 billion-worth of quantitative easing just prior to the general election. However, that money was not pumped into the banking market to give liquidity—98% of it was used to buy Government debt because nobody else wanted to buy it at that stage.

[Sajid Javid]

I quite agree with my hon. Friend. The 10-year gilt yield today is 2.6%—one of the lowest we have ever had in our history—versus 3.8% when this Government came to power. That number is not just important to the financial markets: it makes a big difference to the amount of money this Government have to spend on servicing our national debt, to the amount that corporations have to spend when they borrow and then invest, and to the amount that ordinary households need to spend on things such as their mortgages. It makes a real difference to the cost of living.

Let us consider another indicator. I always like to look at the credit default swap spread, which is the amount that the markets charge for insurance against a potential sovereign default. Today, Britain has, for the first time, the lowest CDS spread of any large European country. According to Bloomberg, of the 157 sovereigns that trade in the CDS market, Britain has the fifth-lowest CDS spread in the world. That, again, is a reflection of the policies of this Government.

I should like to finish by picking up one positive point that the shadow Chancellor made to his party conference, which was the only thing I heard with which I agreed. He said

“we will set out for our manifesto tough fiscal rules that the next Labour government will have to stick to”.

I am glad that he has recognised the need for tough fiscal rules that are independently monitored by the Office for Budget Responsibility, as that is exactly what I suggested in a private Member’s Bill in July, the National Debt Cap Bill, which will have its Second Reading on 20 January 2012.

My proposal is that we should have an independent, tough cap on the net outstanding national debt as a proportion of GDP, monitored by the OBR. That would not be a magic bullet for dealing with potential future debt problems, but it would force the House to have a national conversation every time any Government wanted to increase debt beyond a certain point. If they had a good reason for doing that, the House could support them and Members might have an opportunity to discuss the issue with their constituents. If the House did not accept the Government’s reasons, it could prevent our country from becoming more indebted. I say to the shadow Chancellor that there is no point waiting for the next Labour manifesto because there may not be another Labour Government—at least, not any time soon. It would be far better for him to take action now, put his money where his mouth is and support my Bill, which is coming to the House in just a few months.

In conclusion, there is nothing in the motion that would help to generate investment and create jobs. In fact, if it were implemented in any form, it would destroy jobs. I urge the House to vote against it.

17:07

[Sir Stuart Bell (Middlesbrough) (Lab)]

I am grateful for the opportunity to follow the hon. Member for Bromsgrove (Sajid Javid), who has real knowledge and experience of the bond markets, as he has revealed today. He obviously knows a lot about the ratings agencies and he has a Bill before the House on debt ceilings. He is also an expert on credit default swaps. I share his great enthusiasm for that, but he will have to explain, on the basis of what he has said and what the Government’s policy is, why, if this is about deficit reduction and debt reduction, £46 billion more is going to have to be borrowed and spent in the next few years to cover their policies.

I want to mention Teesside because we have had the good news in the past few days that the insurance company, AXA, proposes to create 450 jobs in Middlesbrough, adding to the 300 staff it employs at Teesdale in Stockton. A great deal of comment—indeed, criticism, I would say—has come from my hon. Friends the Members for Leeds East (Mr Mudie) and for Gateshead (Ian Mearns) about the creation of enterprise zones and about the regional growth fund. In all my years in the House of Commons, I have had to deal with the Government of the day and although we might have liked to keep the regional development agencies, the reality is that we now have enterprise zones and the regional growth fund. We on Teesside have benefited from the regional growth fund and we also have an enterprise zone that we worked very hard to achieve—and now we will work very hard with the Government. There is also the good news that 1,000 staff are being taken on at the former Teesside Cast Products plant, with 100 already beginning the induction programme.

The Prime Minister, in Question Time today, ventured to say, in his feisty exchange with the Leader of the Opposition, that 300,000 new apprenticeships had been created in our country. I visited Carillion in my constituency last week to see the sterling work that it does in training apprentices in the real-life work of bricklaying, concrete mixing, pneumatic drilling, and other such skilled tasks. That is the kind of work that we see being done across the land on rainy and windy days—precisely the conditions under which those young men were working. Those young apprentices are a credit to themselves and to their future. I welcome the Prime Minister’s comments on the apprenticeship scheme.

If we take an overall look at what the Government are doing, we find the law of unforeseen consequences. There is a lack of compatibility in their objectives. Unemployment rises, so benefits have to rise. Benefits have gone up by £12 billion. We have heard a lot about the Welfare Reform Bill; the Prime Minister referred at Question Time to universal credit, and the Chancellor referred to the Bill today; he said that our amendments to it would add to the deficit. Of course, amendments can be reasoned, substantive or probing. Until we see them when they come before the House and know how we will vote, they have no great significance.

We see in our country, and we saw in Greece, that a too-rapid deficit reduction will lead to reduced growth. The classic example of Greece, to which my right hon. Friend the Member for Edinburgh South West (Mr Darling) referred, shows that if deficit reduction is too steep, there will be zero growth. That is the situation in our country: we have been reducing far too quickly. We talk as though my right hon. Friend never had a deficit reduction programme. We had one: we would have reduced the deficit by half over four years—a policy that even Mervyn King supported before the Government changed; then he changed to a different policy.

We were compared with Greece, which I always find very offensive to the Greeks, never mind to ourselves. The fifth largest economy in the world was being compared with a nation state of 12 million people in the Mediterranean—a state that cheated on its accounts with the European Union. Not only was that comparison offensive, but it distorted our country’s entire policy on deficit reduction.

[Kwasi Kwarteng]

Will the hon. Gentleman give way?

[Sir Stuart Bell]

I am not giving way; it is too late in the day. The unforeseen consequence of a too-rapid reduction in the deficit and no growth is that confidence has gone from our system. The hon. Member for Sevenoaks (Michael Fallon) referred to that. We have lost confidence. We say that we have the confidence of the markets, and of course we do; why would we not? We do not have the confidence of the people—of those trying to find jobs, of the young who have lost their jobs, and of other unemployed people. We do not have the confidence of the ordinary person in the street, who looks at the Government and sees the failure of their policies, so I would be cautious if I were a Government Member.

I come back to a statement made by my right hon. Friend the Member for Edinburgh South West, and I invite the House to remember it. There will be a change in policy. It will not be plan B or plan C. It will come in the autumn statement or the next Budget. The policy needs to change if we are to get growth. There is no future in a steep deficit reduction that will never lead to growth—not now, and not in the future.

[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. To assist in enabling a greater number of Members to take part in the debate, the time limit is reduced to five minutes.

17:10

[Guto Bebb (Aberconwy) (Con)]

I hope that the five-minute time limit was not brought in because I was the next speaker. It is a pleasure to follow the considered comments of the hon. Member for Middlesbrough (Sir Stuart Bell). In particular, I welcome his comments about enterprise zones, which were also mentioned by my hon. Friend the Member for South Staffordshire (Gavin Williamson). The Jaguar Land Rover investment that he mentioned was bid for by Wales, too. It is a great shame that, as Tim Williams from the Welsh Automotive Forum stated, one reason why Wales lost out on that investment was the foot-dragging of the Labour Welsh Assembly Government, who refused to implement the enterprise zone process in Wales because it was a Westminster Government proposal.

The comments of the hon. Member for Middlesbrough were much more positive and balanced than those of the right hon. Member for Holborn and St Pancras (Frank Dobson), who decided to attack the credibility of bankers. He might be right, but when one is making a point in the House about the credibility of individuals, one should ask about the credibility of the shadow Chancellor, who advised the former Prime Minister to sell our gold reserves at a very low price. If we want to talk about credibility, we should remember the actions of Members on our own side as well.

This debate is about jobs and growth. I represent a constituency in north Wales where we have a significant small business community. That means that we have a lower dependency on public sector jobs in the Aberconwy constituency than in most of north Wales and most of Wales. That is not to say that the public sector is not important. I regret every single job lost in the public sector, but we have to acknowledge the fact that we must live within our means. The small business community in my part of north Wales has broadly welcomed the actions of the coalition Government. It has seen a credible approach to reducing debt, dealing with the financial crisis that we are facing, and creating a stable economic environment that will allow it to invest and create real employment opportunities for the people I represent.

However, in the context of the debate it is important to point out that there are issues that cause concern for small businesses. When I mention small businesses, I am talking about what most Members would describe as micro-businesses. In the 1980s, when we saw Wales recover so dramatically from the loss of the heavy industries, that recovery was based on the fact that Wales created more new businesses than any other part of the United Kingdom. I am certain that there are businesses in Wales that are willing to take that challenge forward, but there are issues that we need to deal with.

Those issues might not look very important to people dealing with swaps in the market in London and so forth. For example, one of the issues that small businesses in the tourism sector in my constituency resent is the VAT threshold. Most people would say, “What’s he going on about?”, but the VAT threshold is a barrier to growth. Someone setting up a small business in the tourism sector reaches a turnover level of £73,000 and faces a cliff edge—the fact that if they go on to turn over more than £73,000 a year, they are penalised by the system. Anyone who visited Llandudno this week would see cafes that have closed for the winter, bed and breakfast businesses—

[Mel Stride (Central Devon) (Con)]

My hon. Friend is making a powerful point about VAT and tourism. Does he accept that it is wrong that our tourist businesses, particularly those offering accommodation, are handicapped because VAT rates are higher in this country than in many of our continental competitors?

[Guto Bebb]

I am grateful for that intervention. It is my next point.

Let me finish on the subject of the threshold. When small businesses hit a turnover of £70,000, they are about to reach the point where they need to start employing staff. A system that penalises growth is something that we need to re-examine. I know that we have to do so in the context of the current financial situation, but small businesses in my constituency would be delighted if we could do something about the VAT threshold.

On the tourism sector, I am told I have more hotel beds in my constituency than the rest of Wales put together, so I am occasionally accused of pleading on behalf of the tourism sector when I say that it is a real concern that VAT rates on hotel bedrooms, for example, are being reduced to 7% or 6% in other parts of Europe, such as Ireland, Germany and France, yet in Wales we still have a 20% VAT rate. I have spoken with members of the Government about this and I have been told that we need to provide proof that a reduction in the VAT rate in the tourism sector would be beneficial.

A report that I have obtained from Deloitte indicates that if, for example, the VAT rate on hotel bedrooms was reduced from 20% to 5%, there would be an immediate cost of about £1.2 billion in the short term, but over the period of a Parliament, there would be a net benefit of £2.4 billion to the UK economy. When we recall that the Prime Minister stated that tourism should be a driver for growth in our economy and that tourism is a sector that employs people on a very large scale, we need to consider that. I would be grateful if we could receive some comment from the Treasury in due course on the issue and the need to examine it.

Finally, in the spirit of cross-party co-operation, which some Members have mentioned, the fact that Labour Front Benchers have decided to take on board the concerns of the construction sector is not a reason to dismiss the option of changing the rate of VAT charged on work to existing buildings. Many small construction companies argue that the current situation, in which there is a zero rate of VAT on new build but a 20% rate on refurbishment, is an anomaly that we must look at. There are figures that indicate that reducing VAT on refurbishment would be economically beneficial, and the fact that the Labour party has adopted it is not a reason to say no.

17:20

[Emma Reynolds (Wolverhampton North East) (Lab)]

It is a great pleasure to speak in this debate. Today’s shocking unemployment figures are only the latest confirmation that the Government’s economic policy is in tatters. When they came to power last May, the economy was growing and unemployment was falling. Only 16 months later there is a growth crisis in our country. Growth is flatlining. Unemployment is rising and is at its highest level since 1994. Youth unemployment is rising and is at its highest level since records began. Women’s unemployment is rising and is at its highest level since 1988. In my constituency the claimant rate has increased by 10% over the past year and we have an unemployment rate that is double the national average.

What do the Government say? They try to blame the eurozone. That is a completely fatuous claim, because unemployment in the eurozone and in the US is falling. The fatuous comparison with Greece really makes me angry, because Greece’s debt-to-GDP ratio has been double ours for quite some time and over 100% since the early ’90s. The truth is that the Government’s economic policy is politically motivated. Let us face it: the Chancellor is their chief political strategist and his calculation last year was to get the pain out of the way early in this Parliament so that he could offer some sweeteners towards the end, when the economy will hopefully be growing again, so that they can try to win a majority and will not have to tolerate the Lib Dems in government. Their plan is hurting, but it is not working.

The Government’s political motivation and their ideological commitment to a much smaller state is blinding them to the reality that their policies are actually making it more difficult to cut the deficit. They are now set to borrow £46 billion more than they planned. They have created a vicious circle, with massive public sector job cuts, fewer people paying taxes, more people claiming jobseeker’s allowance, less revenue in Government coffers and therefore higher than expected borrowing. They should face up to the fact that these deep cuts are self-defeating.

It is not just the Labour party that is telling the Government that their economic policy is dangerously wrong. Businesses, commentators and economists are lining up to urge them to develop a credible plan for growth. Even the Conservative Chair of the Treasury Committee, the hon. Member for Chichester (Mr Tyrie), who is not in his place, has criticised the Government for lacking a growth plan. He recently said that the

“piecemeal policies for growth need radical improvement. In places it is inconsistent, even incoherent.”

In fact, the Tory leadership was so worried about his forthright opinions that he was literally bundled into a private room for a quiet chat after the Prime Minister’s speech to his party conference. The Chancellor’s good friend, the managing director of the International Monetary Fund, Christine Lagarde, has also warned that the Government should be prepared to change course if the economy is headed for weak growth and high unemployment. Surely that is exactly where we are now.

[Jim Shannon (Strangford) (DUP)]

The Opposition’s motion recognises the need for a one-year cut in VAT on home improvements. Does the hon. Lady feel that such an initiative, by its own nature, will motivate the construction industry, give opportunities to apprentices in particular and ensure that the economy grows, rather than stagnates?

[Emma Reynolds]

I could not agree more, and I was just moving on to the interdependence between the public and private sectors, which the Government seem to be totally unaware of. According to an independent study, at least 2.3 million private sector jobs are now at risk from public spending cuts. Some parts of the country are being hit harder than others. Oxford Economics forecasts that in the west midlands, between 2010 and 2016, 310,000 jobs are at risk in private sector firms that are directly or indirectly reliant on public sector spending. That is on top of a net loss of 50,000 public sector jobs across the west midlands.

The victims of this Government’s policy are mostly the young and women. Young people are the future of our country. For the first time in decades, parents are pessimistic about their children’s futures, wanting them to do better than they did but fearing that their opportunities will be worse than their own.

It is time for the Chancellor to put aside his original political strategy of getting the pain in early in this Parliament and admit that his economic plan is not working. He needs to change direction. There is an alternative. Of course we need to reduce the deficit, but with deep and fast cuts, his plan is not working. Without economic growth, it will not be possible to bring the deficit down.

17:25

[Elizabeth Truss (South West Norfolk) (Con)]

We have heard eloquent speeches about the western debt crisis, but underlying that we have a competitiveness crisis, because the west has built up debt while the east has saved, and there is a gross imbalance.

The legacy of 13 years of Labour Government is one of red tape, meddling and taxation. We are now 83rd in the world for our burden of regulation and 94th for our burden of taxation. We are 28th in terms of infrastructure. In maths, we are 28th, and in science, we are 16th. We have the highest child care costs in the world. Labour made the labour market much more inflexible and made life much more difficult for working parents. In 1997, there were 100,000 child minders in the market; by 2010, that figure had reduced to 55,000 because of the burden of regulation on the sector. Child minders were the cheapest and most flexible way of providing child care. A lot of people have struggled to get child care because of the costs that Labour imposed on the market.

In education, we saw a denigration of traditional subjects such as maths, science and languages. Whereas those in the rest of the world were encouraging students to do those subjects, in Britain the numbers dropped, as did the quality. We have the lowest proportion of 16 to 18-year-olds studying maths in the OECD. Labour Members have talked about youth unemployment, but what about their appalling record in education, which means that many of our young people have left school without the skills they need to work in today’s workplace? Many employers care most about languages, yet the proportion of those studying languages at GCSE dropped from 79% to 44%. The shadow Chancellor used to be the Education Secretary; he did nothing in that job to improve the skills of young people.

Then we move on to infrastructure. Huge amounts of money were wasted on wasteful schemes such as Building Schools for the Future. Meanwhile, in 1997 Labour cancelled the road building programme, leaving roads such as the A11 undualled and the economies of counties such as Norfolk held back. Luckily we have a new Government who are putting in that infrastructure, and that work is starting next week.

The Opposition talk about living standards, but how are we to get our living standards up if we cannot produce goods competitively with the rest of the world? At the moment, we are buying more goods and services from those in the rest of the world than they are buying from us. That is a legacy of the previous Government’s supply-side policies.

What do we need to do? First, we need to reduce regulation. The Chancellor is absolutely right about lengthening the period for applying for unfair dismissal. We heard nothing from the Opposition about their view of this crucial issue; they have not made up their minds about employment regulation. I want parents, not bureaucrats, to be in charge of systems such as child care. We need to get rid of the bureaucracy that has raised the costs and limited the supply of child care. No new places have been provided since 2005, and that is a Labour party legacy.

We need a massive focus on improving maths and science in our schools. All the leading countries—Germany, Canada and many Asian countries—insist on rigorous subjects until the age of 16, including languages, history and sciences. The Opposition have done nothing but oppose the English baccalaureate that brings those subjects in.

It is going to be a long, hard slog to get our country back on track after the huge misuse of capital, the inflexibility and the regulation of our labour market of the past 13 years, but we must do it. Britain has to stop comparing itself just with other countries in Europe; we have to compare ourselves with rising countries across the world. We have to be humble enough to learn lessons from those countries, rather than just looking over our shoulders.

17:30

[Mr Geoffrey Robinson (Coventry North West) (Lab)]

It is a pleasure to follow the hon. Member for South West Norfolk (Elizabeth Truss). Her points about competitiveness in the long term and the immediate future are valid. However, all of us who have been in industry know without a doubt that long periods of deflation, inactivity, insufficiency of demand and cuts hurt competitiveness. That is the trouble with the Government’s policy.

By sleight of hand and cleverness in debate, the Chancellor seems to have turned the debate from being about what the Government’s plan originally aimed to do into being about debt and interest rate management. We are all pleased that there has been some success in those areas, but at what cost has that success come? It has come at the cost of missing the central aim of the plan that the Chancellor set out when he came into office in June last year: to reduce the deficit within this Parliament. It is quite obvious that we are not getting anywhere near that. Indeed, every single indicator in the plan is going into reverse and being missed. The unemployment figures that came out today are disastrous and will make the plan cost a lot more. We are overshooting the borrowing requirement, which was meant to be reduced, by £46 billion before we even come on to the increased costs of higher unemployment and the benefits that go with it.

[Robert Flello]

Will my hon. Friend give way?

[Mr Robinson]

I will give way in a moment.

Inherent in the plan are further unnecessary deflation and cuts in the economy. The growth plan was essential to the original plan of stabilising and reducing the deficit. I agreed with that entirely, as I am sure did all Members, particularly the Government Members who speak about the private sector. However, it relied on the private sector getting going and increasing investment, output and net exports. Every one of those things is going into reverse.

After I have given way to my hon. Friend, I will come back to that point and deal with this week’s National Institute of Economic and Social Research report.

[Robert Flello]

My hon. Friend is making a very good point about growth in the private sector. His constituency, like mine, will have businesses that could export because they have order books for three years, but cannot because the banks will not lend them any money to solve their cash-flow issues. They cannot do the work or fulfil their contractual orders because they do not have the working capital to do so due to the nonsense that is going on.

[Mr Robinson]

I could not agree more with my hon. Friend. I will come to the problem of bank lending towards the end of the few minutes that I have.

To see the central failure of the plan and why it is so obviously not working, one must just look at what the NIESR has said about the progress of manufacturing, on which the plan relies:

“manufacturing output—the biggest contributor to industrial production—fell for the third month in a row, suggesting the engine of the economic recovery had shifted into reverse.”

I do not think that anybody can doubt that. The plan is not working, like it or not. Manufacturing output fell 0.3% between July and August, meaning that it has fallen for three months in a row. At the beginning of this year it was increasing by 6.1%, but that has dropped to 1% on an annual basis. We are looking at a catastrophe.

The Government attempt to blame all this on the previous Labour Government, as if we created the world crisis, which we did not. We have to find a way of yanking them out of that mindset. It is quite clear to anybody looking at the situation as we go into the second year of their plan that they own this economic policy. It is their economic policy and their plan that are on trial, not what the Labour Government did or did not do five, six, seven or eight years ago. It is their plan that is not working. I do not know why everybody on the Government Benches cannot see that that is a simple fact. Whether we did the right thing is totally irrelevant to the present situation. The question is: is the Government’s plan working? It is quite clear that it is not. I will willingly give way to the Chief Secretary if he wants to intervene on that point. Realising that, the Government are trying to move the debate to another issue, which is not the central issue.

The Government are also trying to introduce some measures that will help, and they have gone for monetary easing and credit easing. The trouble is, the history of monetary easing does not suggest that it gets into the real economy. Indeed, when the Governor of the Bank of England gave that remarkable interview to two economic journalists following the announcement of the £75 billion increase in monetary easing, he could not say that it would get into the real economy. He said, “That’s none of my business,” but of course it is. He said, “I will lend it to the banks, what they do with it is up to them.” We know as a fact from previous experience that it does not get to the high street or into the real economy. Unless measures are taken to direct that money effectively in some way or another, against the Governor’s explicit policy of not interfering in capital markets at all, it will not work. We know that Project Merlin similarly failed.

The Chancellor has now come up with a great plan for credit easing, but who is going to administer it and dress up the bonds involved? Will there be a composite element of different companies? Who will decide who gets the money and who does not? Perhaps the Chief Secretary will enlighten us when he winds up the debate, but there is nothing concrete about the plan. It is just an idea that has been floated, like Merlin or monetary easing. It sounds good—if we could get small companies in my constituency and that of my hon. Friend the Member for Stoke-on-Trent South (Robert Flello) back working with money, it would be great. We would all back it, as we are in principle.

It is no good the Government believing that they cannot embark on capital investment right throughout the economy. Of course the plans will take time to introduce, although if they had been started a year and a half ago, when we pointed out to the Government what they should be doing, they would be ready now. Every time we have gone to the Treasury we have been told, “Oh, that won’t have any effect immediately.” That argument just puts off the day on which plans are implemented. The Government’s plan is not working, and we can put forward plans that would get the country back to work and also help to reduce the deficit much more effectively than the Government’s failed plans are.

17:36

[David Rutley (Macclesfield) (Con)]

Thank you, Mr Deputy Speaker, for giving me the chance to speak in this important debate.

Our economy continues to face challenging times, with the crisis in the eurozone and ongoing problems in the global capital markets. The Government’s plan for recovery is therefore more important than ever, and entrepreneurs play a vital role in taking it forward. Our everyday entrepreneurs are critical to the agenda of innovation, job creation and economic growth; it is not just down to the Government.

In Macclesfield we have been doing all we can to support our vital small and medium-sized enterprises, with bi-monthly breakfasts at which up to 130 businesses come together to work out what can be done to strengthen the local economy. We also have an economic forum to implement the action plans that are needed, but it is clear that what entrepreneurs in Macclesfield and across the country want is a sound economic framework and sound economic policies to support them in their work.

Sadly, entrepreneurs are living with the legacy of not just the previous Government’s deficit but the £90 billion a year cost of new regulations on businesses that have been put in place over the past 13 years. That additional cost makes the difference between profit and loss for small businesses. My hon. Friend the Member for South West Norfolk (Elizabeth Truss) has already pointed out that our regulatory burden puts us 89th out of 139 countries in the perception of the weight of regulation. That has to change.

It is not just domestic regulation that is entangling our entrepreneurs, because the European Union has become a major source of red tape. Since 1997 the EU has produced 100,000 pages of new regulations that tie the hands of our SMEs and damage our economic potential. That must change.

There are several important priorities in building the entrepreneurial economy that Government Members want to see. We want to see a reversal of the regulatory tide, the simplification of UK employment law and the realisation of our SMEs’ export potential. The Government are already working very hard in those areas and have introduced a one-in, one-out approach to regulation, which will be vital. We have already seen the removal of 257 regulations in the retail sector alone. The new three-year moratorium on new regulation for the smallest firms will help to protect start-ups during their most vulnerable phase, and the red tape challenge will encourage businesses to identify the regulations that are preventing them from doing the things they need to do. Those are positive steps in stemming the tide of regulation.

In addition, we need to do more to simplify employment law, which, given that job creation is vital to our economic recovery, is a huge priority. As has been said, the Chancellor has done a great job in introducing an extension of the qualification period for unfair dismissal. That is a way of reducing risk for employers when they are taking on new staff, and it has been welcomed by many SME trade bodies.

Another area that needs to be worked on is realising the potential abroad of our entrepreneurial talent. A report by the Select Committee on Business, Innovation and Skills found that only one third of our SMEs are involved in international trade. Germany has a much higher percentage. The role of UK Trade & Investment is vital in that respect. It is extending its reach to more businesses, but when we look at the potential and the entrepreneurial flare of the 5 million SMEs in this country, it is clear that more needs to be done in communicating those great opportunities in overseas markets. We need to do more to help small businesses to do that.

The Government are working to improve the conditions for economic growth, but, as in a human body, not all growth in the economy is good, which the record of the previous Government shows very clearly. We had unprecedented growth in the deficit, the burden of debt and the weight of business regulation. In the good times, they could have created the economic equivalent of an entrepreneurial athlete, but they instead created an economy that was more like a couch potato, bloated on debt and ill prepared for the downturn. We are changing that.

The Government clearly cannot and should not seek to build an entrepreneurial economy by themselves. They are working with small businesses to create the conditions that will unlock the potential of our entrepreneurial, everyday heroes. Our SMEs also have a responsibility in that task. Now is the time for them to demonstrate the same energy, commitment and creativity that is required in the marketplace to help constructively to shape Government policy.

17:41

[John Mann (Bassetlaw) (Lab)]

Having listened for an hour and a half to the two Front Benchers, I suggest that we put them in a ring in Westminster Hall the next time we debate the economy—we could charge the public a little fee, which would be a modest contribution to deficit reduction—and allow the rest of us a little more time to discuss the economy.

First, I want to make some points that might be of particular interest to Labour Front Benchers—I trust that they will be noted in detail. I congratulate Labour Front Benchers on two major changes in the past three weeks. I mentioned the first change earlier—the change of policy on VAT. The previous policy, which I disagreed with in the Chamber, was that the Labour party was in favour of a permanent VAT reduction. Now, the policy is for a temporary reduction—from what the shadow Chancellor said, it appears that there would be a 12-month temporary reduction.

The figures are huge. Just in the next Parliament, that change in policy will mean that £50 billion will be available to a new Labour Government from revenues to the Exchequer. In the context of a snap election, potentially £20 billion extra would go into the Exchequer in the next three years. Those are major sums, and I therefore congratulate Labour Front Benchers on that huge change in policy.

That is not the only change in policy—I would recommend the second policy change to the Government, and I should like to hear in the winding-up speeches whether they are prepared to adopt it. Labour’s policy now is that all moneys from the privatisation of the more recently part-nationalised banks will go 100% to offset the debt. That ought explicitly to be the policy of the Government. I trust that they are not thinking of creating youth unemployment now to delay for give-away Budgets just before the election. The electorate, as well as business, will not forgive them for that.

This Government have adopted an economic policy of Japanisation. They are adopting the Japan Government’s approach, and anyone who wants to see precisely where they are going needs to look at the economic history of Japan over the past 20 years.

[Jacob Rees-Mogg]

It is not the Japanese approach. The Japanese Government have enormously increased their national debt, while we are going to reduce it.

[John Mann]

On inflation and monetary policy, this is precisely the Japanese model, but it does not work, which is why there is already £46 billion in additional debt. The lesson from Japan is that we cannot deal with the debt without growth. That is the lesson that the Government are not listening to. I recommend that Members on both sides of the House read up on the economic history of Japan.

I say to the Labour Front-Bench team that we need to be more specific about the cuts that we would make. I realise that on welfare, for example, we cannot be specific. Like the Government, we are in favour of major change, but we do not know whether that will be successful. The fact is that the state will shrink over the next few Parliaments—there is no other way to pay for our deficit reduction plans or the Government’s less coherent plans. We have to pay back the debt. The Government want to pay it all back now, while we are saying, in essence, “No, we wouldn’t pay back as much now, but it would be paid back in future years.” That is the key difference. Either way, it means that the state will have to shrink in future years, and I can suggest some things that we should be stating.

What about Government Departments? Housing costs nine times as much in London as in Bassetlaw. I am not suggesting that a major Department should move to Bassetlaw—although we have the land—but there are Sheffield, Leeds, Nottingham and many other places. Let us see the Department for Culture, Media and Sport shifted to Manchester with the BBC. Let us see the Department for Business, Innovation and Skills shifted. Let us see the Department for Environment, Food and Rural Affairs shifted. Let us see huge Departments, in their entirety, shifted out to the regions of England. That would give a boost to economic growth and bring permanent savings to the Exchequer. That ought to be part of our policy.

There are other smaller things that we could do. What about the British Council? What a nonsense of an organisation to sustain! We could take some of that money and give it to British universities to do English-language training abroad and build their business base in emerging markets. At the same time, that would reduce costs. What about unitary authorities? Of course, many Members, being ex-councillors, do not want to get rid of unitary authorities. What nonsense! There are 27 press officers in Nottinghamshire and 10 chief executives, with head offices all over the place. Scrap them! Scrap large numbers of councils! What about the police? We cannot merge the police, but we can merge their headquarters. We could rationalise NHS buildings across the county. There is a vast array of things that we could do. There are the British Army bases in Germany. We could reduce the size of the base in Cyprus. We should be levying at least 5% on the UK Crown dependencies to which we provide security. We should offer a permanent reduction in national insurance for small businesses to get young people into apprenticeships and back into work.

17:48

[Jackie Doyle-Price (Thurrock) (Con)]

It is a great pleasure to follow the hon. Member for Bassetlaw (John Mann). I was rather shocked to find myself agreeing with a number of his constructive suggestions, which highlights the fact that this debate has been one of contrasts. There have been some very constructive contributions from Members on both sides of the House on how we can do more to encourage growth, but some have been disappointingly partisan. Our constituents expect us to give wise counsel when discussing important issues such as job creation and economic growth, not to engage in party political spats.

I think that we would all agree that the contraction of the economy and the financial crisis were inevitably going to impact on economic growth. The major fault line between the two sides of the House appears to be the role that the Government can play in addressing that. The Opposition keep repeating their call that the Government must slow the rate at which we are cutting, but the irresponsible thing to do was to spend more than the country could afford in the first place. Trying to right that wrong by spending more money that we do not have is not the way to fuel growth. At the heart of the Opposition’s motion is the notion that Government spending can pull us out of the recession, but again that is simply not the case. It is time the Labour party learned that it is people and businesses that generate wealth, not the Government. It is our job as a Government to facilitate and enable private businesses, not to try to spend our way out of recession and load those businesses and individual owners with higher tax bills to meet that spending and to service the inevitable debt.

Some Opposition Members have done their best to highlight everything that is ill in the world, but we also have to recognise that a lot is going well in this country. Only last week my right hon. Friend the Secretary of State for Business, Innovation and Skills and the Under-Secretary of State for Transport, my hon. Friend the Member for Hemel Hempstead (Mike Penning), the Minister responsible for shipping, came down to the borough of Thurrock to celebrate the investment in Britain’s new global shipping port and logistics centre. That investment of more than $1 billion represents the largest job-creation project in this country at present, with the potential to create up to 36,000 jobs in what will be Europe’s largest logistics park and, in the short term, 1,000 jobs as the next phase of the project kicks off.

However, the port’s contribution to the economy does not end there. Rather, it is a great illustration of how private investment in one place has a positive effect throughout the local economy. Businesses around the region—27 million people will be within half a day of the port—will be able to take advantage of a more cost-effective way of getting goods into and out of the country. The facility will transform our maritime port infrastructure and play a massive role in helping Britain’s economy over the coming years. It is a real force for competitiveness and illustrates the impact of good private investment.

That is not the only investment taking place in my area. The port of Tilbury, now in its 125th year, is also investing in expansion. There is also massive investment at Tilbury power station to create the world’s largest dedicated biomass power station, which will be contributing to the national grid before the end of the year. Those are just a few examples of how private business is generating the investment that will create more jobs and add more wealth to the bottom line of the UK economy. The answer is not Government spending; it is private sector investment. Those examples show that Britain is open for business and that private sector companies have the confidence to invest in the UK.

When the Opposition highlight what is going wrong, they are talking our economy down. We have a lot to offer in this country and we should be encouraging it. One thing that has been mentioned is access to finance for small and medium-sized businesses. Only last week I visited Barclays bank in my constituency, where I was told how much money the bank had been able to lend to businesses. However, the complaint was that although money was still available in the pot, small businesses were not coming for finance because of the narrative coming from the Opposition Benches about how it was not available. Let me say this to Opposition Members. Please stop talking our economy down. What they say will become a self-fulfilling prophesy. We have a lot to offer in this country; it is about time we encouraged it, not beat it up.

17:52

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

Today we are talking about this Government’s 18 months of turning growth into stagnation and how they are essentially borrowing to cut. “A manufacturing export-led recovery” is the Government’s phrase—something I agree with—but those words sound as hollow as the Tory conference floor during the Prime Minister’s conference speech. The industrial production numbers for August coupled with a quarterly poll from the British Chambers of Commerce point to the reality of long economic stagnation. Industrial output was up 0.2% between July and August, but that was entirely due to volatile energy and utility sector prices. Manufacturing output was down 0.3% month on month—much worse than predicted—with export order prospects at their worst for two years according to the BCC.

In retail, consumers are spending less than a year ago, as domestic spending runs below inflation. For all the talk of an export-led manufacturing policy, the Government are still completely reliant on an ever-falling pound in relation to the dollar. However, that is by no means an industrial strategy, and it is certainly not industrial activism, especially as LEPs—another Government growth policy—still have no discernible powers. Nor do they have budgets or money, making them easy to organise, as they do not need accounts departments. Enterprise zones are vague, while funding for the regional growth fund nationally in England is, as we all know, lower than the pot of cash for the Post Office mutualisation fund. Indeed, we have waited six months for the RGF to be financed, but we have still received no answer from the Government Front Benchers about when that money will come through.

[Gavin Williamson]

Will the hon. Gentleman give way?

[Tom Blenkinsop]

I am sorry, but I am not taking any interventions because of the time.

Those on the Government Front Bench talk about an employee having to work for 24 months before being eligible for employment rights, but that might give the Government some difficulty, because it would run counter to the interests of new starters—young people seeking work, as well as apprentices. If the Government elongate the time to 24 months, it will be easier for a company to sack an apprentice.

Today in the north-east, we have seen a reduction in employment of 17,000, an increase in unemployment of 19,000 and a 1,500 increase in those claiming jobseeker’s allowance. We have seen the highest UK unemployment since 1994. What is the cost to the Treasury and the taxpayer in benefits? The situation also damages demand in the economy.

[Chris Heaton-Harris (Daventry) (Con)]

Will the hon. Gentleman give way?

[Tom Blenkinsop]

I am sorry, but I am going to continue.

Industry is withholding spending. Small businesses seeking capital cannot get it except at exorbitant rates, and those that do have capital are holding it as cash and not investing. Large industries with access to the money markets are still holding off, as there is no national state capital underwriting or guarantees. This all comes down to confidence. In an article in The Times yesterday entitled “Here comes the double-dip, say finance chiefs”, Ian Stewart, Deloitte’s chief economist, was quoted as saying:

“Although corporates have the firepower to expand, at the moment their trepidation is with growth, so they are cycling back to exactly what they were doing in late 2008, which is cutting costs and building up cash.”

The most troubling factor is the Chancellor’s deficit reduction plan. It was predicated on 3% growth, but we have had less than 0.2% growth since May 2010. This means that his plan is out of kilter with reality. The Office for Budget Responsibility predicted £46 billion extra borrowing by this Government, but that figure is now rising. Sure enough, this Tory-Lib Dem Government will have to borrow half a trillion pounds. However, unlike the Labour Government, who borrowed for growth, this Government are borrowing to cut, and they are cutting too fast and too deep.

The hon. Member for South West Norfolk (Elizabeth Truss) referred to savings surplus economies such as China, Germany and Japan. They are also manufacturing surplus economies. We were one of those, back in the 1980s, until the decimation of the coal, steel and chemical industries, all of which used to exist in my area. Under the 13 years of Labour government, we saw record investment in industry. I speak as someone who worked, and got his hands dirty, in industry. That Government invested in industry at record levels. We set up organisations such as NEPIC—the North East of England Process Industry Cluster—and One North East, which had a budget of £2 billion. We gave businesses leadership, and we gave those organisations the cash to bring businesses in. We saw more than 60 chemical companies come to Teesside, but now we have seen the closure of the Teesside Beam Mill and the loss of 1,500 jobs in the steel industry from Scunthorpe to Teesside. Job losses at BAE Systems and Bombardier are also just round the corner. This Government need to reassess their policy very fast.

17:57

[John Hemming (Birmingham, Yardley) (LD)]

I will not take any interventions, as that would leave less time for others to speak.

The Opposition are complaining that the forecasts show that the Government will have to borrow £46 billion more than was previously forecast. Their solution is to borrow more money. They are proposing to borrow an additional £31 billion in any one year—I think that that is the precise figure. I asked the shadow Chancellor what he thought the limit on borrowing should be, but he did not answer the question. One presumes therefore that he has no idea what the limit is. Well, the limit on borrowing is called the International Monetary Fund, when it has to come to the rescue when the markets will not fund a country’s deficit.

The reality is that the interest rates on deficits matter, because they represent a perception of the risk of non-repayment, and of the possibility that a Government will become insolvent. The difficulty is that, as a country increases its deficit, it also increases that interest rate. Gradually, the interest rate increases on the whole of Government debt, not just that borrowed in one year. If the whole of Government debt is in the order of £1 trillion, 1% of that is £10 billion. That £10 billion has to be found either from additional taxes over time, or from additional cuts. Labour’s strategy would lead to greater cuts or greater taxes in the long term—probably greater cuts.

Let us look at how we have got into this situation. An interesting person to turn to for quotations on this is Lord Turnbull, who was the Cabinet Secretary at the start of the third Blair Government. He said that excessive borrowing started to be a problem from 2005. I quote him:

“It kind of crept up on us in 2005, 2006, 2007, and we were still expanding public spending at 4.5% a year”,

and he argued that the Treasury should have put more money aside. He said last year that the primary reason Britain was

“in the mess that we’re in”

was that

“public spending got too big relative to the productive resources of the economy, by error”.

He added that a loss of output caused by the financial crisis also contributed to the Budget deficit. The mistake is thinking that the problem is caused by one thing alone. There are a number of factors: one is the banking problem; another is overspending by the previous Labour Government.

What we have before us is a motion to deal with a problem caused partly by overspending, to which the proposed solution is yet more spending. In this instance, that means borrowing by the Government for private spending, to be fair, although a cut in VAT on a temporary basis does not generally feed into people’s pockets, but into those of the corporations that do not reduce their prices and do not have to pay so much tax.

In his memoirs, Tony Blair proposed what should have been done. On page 679, we can read him reflecting on what should have been done, consistent with his analysis of the economy:

“In my view, we should have taken a New Labour way out of the economic crisis: kept direct tax rates competitive, had a gradual rise in VAT and other indirect taxes to close the deficit, and used the crisis to push further and faster on reform.”

Tony Blair was clear that Labour should have put up VAT.

I kept my ballot paper for the Labour leadership election; I did not think it was right for me to fill it in. One interesting thing about that ballot paper was that it came along with the manifestos of the candidates. I looked at the entry for the shadow Chancellor, who said that he had been “leading the fight” against the VAT rise. Last year, he led the fight against the VAT rise; now he says, “Yes, we need the VAT in the long term”, as at least the hon. Member for Bassetlaw (John Mann) recognises; he must have managed to persuade him.

What question needs to be asked? The Government have a strategy, and the strategy is reducing the deficit. There are obviously difficulties, given that the solution must be worldwide. Is it therefore right to follow the Labour party’s example and borrow yet more money—another £31,000 million a year—increasing the debt and potentially increasing the need for rescue in the long term, or should we keep on with the strategy we have? My view is that we should keep to the strategy that we have got.

18:02

[Austin Mitchell (Great Grimsby) (Lab)]

I knew something was desperately wrong with Government economic policy when I heard last week that the Prime Minister had to be forcibly restrained from telling us all to pay off our credit card debts. It was as though he had never taken a degree at Oxford in PPE—politics, philosophy and economics—with first-class honours or had learned nothing from it. I think his father would be well qualified to ask for his money back from Oxford, because that goes directly against Keynes’s advice on the savings fallacy, which is “The more you save, the more you compound recession.” It also runs against the advice of the Office for Budget Responsibility, which predicated what pathetic growth is going to occur the next year on consumers building up consumer debt to pay for products, increasing demand.

I cannot launch the same accusation against the Chancellor because he took a history degree. He does understand economics, but as far as I can see he thinks he is the reincarnation of Montagu Norman: he has the same policy and economics as him. Neither of them, in their obsession with debt and borrowing—also well exemplified in the last speech—shows any consideration, or knowledge, of demand. Because demand is so weak in our economy, there will be no investment, and if there is no investment, there is no increase in production and no increase in employment. If there is no increase in either of them, there is no growth, yet it is only growth that will allow us to pay off the debt we have accumulated. Demand is the key problem, and the obsession with debt obscures it. Instead, the Government compound the problem by cuts that are going to kill recovery.

The folly of that is that we are freer than any other country to act for ourselves and to take measures to expand the economy and boost demand. Europe is locked into the euro crisis—a self-generated crisis—from which we were saved by my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown), who, thank heavens, kept us out of the euro. Greece and the other Club Med economies, which must include Ireland now that the gulf stream is warming up the Irish economy, cannot devalue or escape from the crisis by reducing interest rates, so they are trapped. We are not. We can reduce interest rates, and we can devalue; indeed, we have devalued. We can use all the weapons of economic management that the euro prevents.

Nor are we in the same trap as America. Its President is effectively trapped by a Republican Congress whose members have “Tea Party economics” embossed on their foreheads, and can neither increase taxation nor boost spending. We are free to act—yet that freedom has been abused by action that is directly counter-productive, and based on piggy-bank economics rather than any manifestation of economic sense. Such a policy would be appropriate for a Government of millionaires who could sit comfortably on the piles of their money and say, “A few more sacrifices from the working class, a few more unemployed, a few more public servants fired, and we’ll all be better off: Britain will win through thanks to the sacrifices of other people.” However, it bears no relation to economic sense, so it will not work.

Our recovery was always going to be slower. The recession hit harder here because of the exaggerated financial sector that has resulted from the destruction of so much of our manufacturing—particularly the Thatcher destruction of the 1980s—and the fact that so much of it is now foreign-owned. However, we must not compound our difficulty and make recovery even slower by dragging out a period of low growth. Unless policy is reversed and we have a plan B—I have a name for the great day when policy is reversed; I am going to call it national B-Day—we shall be doomed to a winter that will be hard, miserable and tough, in which unemployment will increase, more people will be put out of work to increase Government borrowing and Government debt, and more small businesses will be destroyed.

18:07

[Chris Heaton-Harris (Daventry) (Con)]

I welcome the hon. Member for Leeds West (Rachel Reeves) to her Front-Bench position, and wish her all the best in it. It has been fascinating to listen to some of the speeches made by Members sitting behind her. We heard, for instance, the “Tale of One City”, the wonderful city of Middlesbrough. The hon. Member for Middlesbrough (Sir Stuart Bell) emphasised the importance of the enterprise zone in securing jobs in the new businesses coming to the city, while the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) essentially “dissed” the whole project. I hope that Middlesbrough has the future predicted by the hon. Member for Middlesbrough rather than that predicted by the hon. Member for Middlesbrough South and East Cleveland.

In discussing this motion about jobs and growth, Opposition Members have tended to refer to public sector jobs and growth while those on our Benches have understandably referred more to the private sector. We know that every penny spent by the state must be created by those who are demonised by a number of Opposition Members, especially the Leader of the Opposition, as those nasty, awful people, the wealth creators of the nation. As my hon. Friend the Member for Thurrock (Jackie Doyle-Price) reminded us, it is people and businesses who generate wealth, not the Government.

Businesses such as Cummins, Ford, Tesco, DHL and hundreds of smaller manufacturing businesses are all creating jobs in my constituency at this moment. I note that the hon. Member for Leeds West has not tried to intervene to remind me about the job statistics in my constituency. Under Labour between August 2006 and August 2010, soon after the present Government came to office, the number of jobseekers nearly doubled. Under this Government it has fallen by a small handful, and the number of people claiming jobseeker’s allowance for more than 12 months has dropped by a third. That is because we have a healthy private sector that we are trying to encourage in the best ways available to us.

I wonder which of the businesses whose names I read out earlier—Cummins, Ford, Tesco and DHL, those horrible big businesses—are among the predatory businesses that the Leader of the Opposition said, in his conference speech, that he or his civil servants would blacklist: businesses such as the awful AA, those terrible people from Saga, McVities, or—my God, even worse than that—the people from Boots!

I am lucky, as my constituency has a dynamic district council that is doing its best on planning and encouraging growth. We have also been lucky in that our bid to have a university technical college based in the constituency was successful. We know that future jobs growth must be sustainable; it needs to be for the local market, and it needs to provide relevant jobs for relevant industries.

This strategy is working in Daventry. When people driving up the M1 reach junction 18 they see big sheds on the left. That is DERFT—the Daventry international rail freight terminal. Some 9,000 new jobs will be created if DERFT 3 goes ahead.

We want to encourage small business. The Labour party has always had a plan for that, too—it has a good reputation in encouraging small business—but our plan is different. Labour’s plan was to take a big business and add a shed-load of regulation—in which case, sure enough, we will absolutely get a small business—whereas our plan is to make sure we encourage people to take that tiny bit of risk required in business by deregulating as much as possible and having a flexible job market that enables them to create jobs.

My background is not the same as that of the hon. Member for Middlesbrough South and East Cleveland, as I did run my own business. I worked nights for 11 years importing and wholesaling fruit and veg. Alas, however—the hon. Member for Great Grimsby (Austin Mitchell) is wrong about this—I am not a millionaire. I do not even aspire to be one. What I want to do is make sure that my constituents who do aspire to be millionaires get the opportunity to achieve that, and running a small business is a very good way to start.

If we want to encourage jobs and growth, we need to make small businesses more successful. Therefore, we need to reduce regulation, so I welcome the national insurance measures we have introduced, but I think the Government can do much better on relaxing procurement rules to enable small businesses to bid for county council contracts without having to go through pages of needless paperwork. To allow small businesses to succeed, therefore, we need more flexible labour markets and less regulation, and we also need to sort out Her Majesty’s Revenue and Customs.

18:12

[Mr Michael Meacher (Oldham West and Royton) (Lab)]

Today, we were once again treated to a typically knockabout speech from the Chancellor. It was founded on the entirely specious notion that the cost of implementing the five points put forward by my right hon. Friend the Member for Morley and Outwood (Ed Balls) would be £27 billion, of which £15 billion is supposed to represent speculative market response. In fact, however, if any Government were to come forward with a plausible growth policy, it would almost certainly be greeted with a positive market reaction.

The key problem for the British economy today is not indebtedness; rather, it is lack of demand. The UK debt-to-GDP ratio is, in fact, quite modest, but Government cuts are clearly worsening the problem of lack of demand while hardly reducing the deficit at all because of falling tax revenues and rising unemployment. At present, for every 2.7 jobs lost in the public sector, only one is being created in the private sector.

The alternative policy is a public sector-driven jobs and growth strategy. That is the only way to get out of slump when the private sector contracts, which it is doing at present. We must get people off the dole, thus reducing the enormous cost of benefits, and get them into work where they can contribute to tax revenues as well as regain their independence. Keeping 1 million people on the dole costs £7 billion a year. For the same amount of money, 400,000 jobs could be created.

The Chancellor always says at this point, “Yes, but how’s it going to be paid for?” Well, I will tell him. It need not be paid for by borrowing at all. First, the growth dividend even from a miserable 1.5% growth a year still yields an extra £40 billion in Government revenues over four years. A financial activities tax in the City at even the modest rate of 0.05% would raise about £20 billion a year. The Chancellor changed the controlled foreign company rules and those for capital gains tax, capital allowances and inheritance tax. The only beneficiaries of those changes are corporations and the very rich, and they will deprive the Exchequer of a further £2 billion a year over the next few years. That money could have been used to create jobs. The reason the Government are not going to do any of those things is, of course, that they have an ideological hang-up about the public sector. The whole point about the massive cuts programme is that it provides the opportunity that the Conservative party has been awaiting for so long to squeeze the welfare system, shrink the state and make, once and for all, the transition from the public sector to a fully privatised economy.

The Chancellor has two answers to the important question about from where we get future growth. He says that it is by returning as quickly as possible to the pre-financial crash neo-liberalism City dominance. That is not tenable and it is not sustainable after what has happened. Secondly, he says that it is through private borrowing. Extraordinarily, the Chancellor, who rightly said before the election that private borrowing was out of control, is now proposing—this is the last resort of a pretty desperate man—to rack it up from its current level of £1.5 trillion to more than £2 trillion by 2015, which is an increase of 35%, according to the Office for Budget Responsibility. Of course that probably will not happen, but if it did it would certainly lay the foundations for an even bigger financial crash next time around.

My final point is that the elephant in the room, the state of manufacturing industry, is simply being ignored and neglected by the Government. Last year, the UK deficit on trade in goods was £100 billion—6.8% of GDP. That is simply not sustainable. We need a smaller City, and a bigger and more robust manufacturing sector. That means putting far more resources into improving manufacturing productivity; skills training; protecting strategic sectors of our economy from foreign takeovers; restoring supply chains in key sectors, which have been broken up by over-ready selling up; incentivising an increase in market share over short-term profiteering; and helping small and medium-sized enterprises to upgrade to be higher tech, so that they are less exposed to Asian competition. The Opposition do have a plan for growth. Until the Government come forward with a plan for growth, they do not have an economic policy worth the name.

18:17

[Steve Baker (Wycombe) (Con)]

It is a pleasure to follow the right hon. Member for Oldham West and Royton (Mr Meacher), and I share some of his concerns about the outright dominance of the City. I wish to draw the House’s attention to my declaration of interests in relation to Cobden Partners.

We are in the midst of this jobs and growth crisis, so I feel that we should ask ourselves where jobs and growth came from, where they have gone and where they will come from in future. We know that this is a debt crisis, so why did people borrow so much and save too little? It was because interest rates were too low for too long. Anybody who has a savings account or a mortgage will know that it is the Bank of England which in the UK determines the height of the interest rates market. The set-up of our monetary system means that money is loaned into existence. It has been an institutionally inflationary monetary system since the end of Bretton Woods.

My argument, which is one Hayek advanced in his Nobel lecture, is that when employment comes from an increase in the money supply, that employment lasts only as long as the money supply increases, or perhaps only as long as it continues to accelerate. My preferred measure of the money supply comes from Kaleidic Economics. If we look at it, we find that from 2002 the money supply not only increased, but accelerated in its increase—the level was above 10% from 2004 and in 2007 it went as high as 27% by that measure. The money supply is now contracting at a rate of about 5% a year.

I am delighted to see the previous Chancellor in his place, because had he accepted my intervention earlier I would have said to him that at the time he left power there did appear to be growth, but that it was simply quantitative easing washing through the system, distorting the overall GDP numbers and causing the impression of growth. In fact, we had further money entering the system, distorting the structure of relative prices and making the problem worse later.

If we examine the Office for National Statistics price index going back to 1750—at least one of my hon. Friends will remember—we find that we have had the most astonishing currency debasement since 1971. Indeed, in the 19th century prices experienced secular deflation, and had an ordinary person saved £1 in 1800, they would have been able to buy a larger basket of goods with it in 1900. Had that person saved £1 in 1971, they would be extremely disappointed today.

Inflation is not harmless. It widens wealth inequality and creates patterns of employment that are sustained only by increases in the money supply. For those of us who are sincerely concerned about jobs and growth, it is time to consider whether we should not expect to create employment simply by increasing the money supply. It seems to me that we are now boxed into a corner. We know that we have got into this mess through low interest rates, yet we cannot now afford to allow interest rates to rise—far too many people are far too indebted. That leaves the Government with something of a problem and I think they are right to think extremely carefully about how we can achieve deleveraging. The Chancellor is correct, and has been for some time, to call for an economy based on “save and invest” and on real productive savings. It does not do to expand the money supply in excess of real savings, by which I mean prior production and consumption that is less than that production. The accumulation of capital is the only sustainable way to raise real wages for normal people.

I encourage the Government to stick to their policy of encouraging save and invest, but I express misgivings about quantitative easing. I ask them to look at the theories of the monetary effects on the trade cycle and whether patterns of employment have been sustained by increases in the money supply. As we go forward, I ask them to consider extremely carefully whether we need to go somewhat further than Vickers in creating the right monetary system on which to build a sustainable economy.

18:21

[Chris Evans (Islwyn) (Lab/Co-op)]

It is a pleasure to be called to speak in the debate, and a pleasure to follow the hon. Member for Wycombe (Steve Baker). As a history graduate, I have enjoyed the history lessons during this afternoon’s debate. I enjoyed the intervention from the hon. Member for Monmouth (David T. C. Davies), telling me all about the ’40s, ’60s and ’70s. I have heard many Members tell me what happened under a Labour Government long before I was born, but it seems to me that we have always bounced back to the same point: those on the Tory Benches say that it is all Labour’s fault, while we say that it is all the Tories’ fault. The truth is, where is that getting us?

In my constituency, 2,000 people are claiming jobseeker’s allowance. Some 40% of those are under the age of 24. Behind those figures, there are real human tragedies: kids leaving school believing that there is no hope for the future other than being driven—let us hope not—into the hands of drug dealers or becoming involved in crime; the hard-working father who comes home one night and says to his family, “I’ve been made redundant after 20 years,” and his wife who worries; the single parent who is bringing up children on her own and who has just lost her job. What does she do? It is all very well quoting statistics and figures, but what can we do for those people?

Unemployment is not a price worth paying. For me, anybody losing their job is a total tragedy. That is why the motion is so important: we should use bankers’ bonuses to create youth jobs and do something to help people, not after being out of work for six months, as the Prime Minister said in his speech, but from day one. I remember when I was a trade union official and jobs were going as, unfortunately, they were being offshored. A scheme was created so that when people were made redundant the company matched half their redundancy to be used for training. Some people decided to become driving instructors, whereas others in the Solent decided to become ship builders, and so on. It interested them and that was what they wanted to do. I want some incentive in the tax system for companies that make people redundant to use similar ideas.

[David T. C. Davies]

Will the hon. Gentleman give way?

[Chris Evans]

I am sorry, I cannot take an intervention because other people want to speak, although I would love to give way to the hon. Gentleman.

As I was saying, when a person is unemployed—I do not know how many people in the Chamber have been unemployed—it is soul destroying. It reduces confidence and, in the worst cases, it brings about depression. If anybody wants to see a microcosm of the economy, they should walk down the local high street. There is nothing more sad and depressing than seeing the butcher, the baker and even the candlestick maker all boarded up. Nothing says more clearly that the economy is not working.

So what can we do? We could reduce VAT on a temporary basis to encourage people to come back to the high street, but we could do more than that. We could encourage local authorities to reduce their business rates so that people can stay in their businesses and we could encourage communities to come in so that these places are not boarded up. Above all, we could ask authorities to start providing free car parking. That might be a bit more simplistic than the credit swaps we have heard about, but I am concerned.

I am going to say something quite shocking which is not in vogue at the moment. This afternoon, I spoke to Lloyds TSB and I thought, “It's all very well to bash the banks”—and we should bash those who have been responsible—"but we have to make an assertion and realise that only one part of the banking industry failed." It was not the retail banker or the cashier in Blackwood High street or Newbridge, who serves their community; it was the bankers in the City, and that part should be reformed. However, we have to be very careful when we talk about reform. We cannot introduce regulation that hinders financial innovation. That would be impossible, and I am very concerned about that.

We have to ask ourselves how we are going to encourage manufacturing when we do not encourage banks. I will be honest: I have been one of the banks’ biggest critics, but at the moment we are asking them to do something that is almost impossible—we are asking them to save money and lend at the same time. How will they do that? I do not know, but tonight I will walk through the Lobby and support the motion, because I genuinely believe that we need to do something to promote growth.

18:26

[Eric Ollerenshaw (Lancaster and Fleetwood) (Con)]

I am pleased to speak at this late stage and it is a joy to follow a Welshman who spoke, in all his eloquence, about unemployment. I should like to let him know that Government Members understand the devastation that a single extra person becoming unemployed can cause to families. Many Government Members have been through that, but the problem for us in voting for the motion is this: how can we go back to our electorate and say that we voted for a motion that talks about “sustainable” deficit reduction without mentioning any figures or its implications? The motion talks about “a steadier deficit plan”, but I should have thought that the Chancellor was pretty steady about the deficit reduction plan and that we were pretty steadily behind that plan. At least we are prepared to say where it is and what the figures are.

The Opposition talk about a credible strategy for growth. In some senses, I want to follow the hon. Member for Bassetlaw (John Mann) and others who have tried to introduce a degree of practicality into the debate and provide some suggestions about dealing with the difficulties we are facing. Let me outline my problems with the five-point plan for growth. I will not be churlish by suggesting that it is only five points and not six. There had to be only five points on those little cards that we used to have at election time, because six or seven was too many.

Let us look at the detail of the five-point plan. We can see that Opposition Front Benchers have moved somewhat on the VAT issue and are now talking about a temporary cut. I have always thought, in terms of economics, that temporary proposals sound a bit suspicious both to me and to my voters as we do not think that they will have any real impact.

This Government are acting to promote long-standing infrastructure growth, as other hon. Members, such as my hon. Friends the Members for South West Norfolk (Elizabeth Truss) and for West Suffolk (Matthew Hancock), have said. They pointed to the dualling of the A11 and I shall point to the M6 Lancaster-Heysham link in Lancashire, which has been on the stocks since 1948. It has taken this coalition Government to put money into that, but it is actually happening.

The proposal for a one-year national tax break for small firms taking on extra workers seems suspiciously like the coalition’s proposal for a national insurance holiday for new companies, except those in the south-east and the east, for up to 10 workers. That is where Opposition Front Benchers have missed a trick because nothing in their proposal would help us regionally in the north. At least the coalition Government have recognised the mistakes of the previous Government in that London and the south-east did not need an extra regional development agency or the other additions. This is about the balance between the north and the south, but the Opposition’s proposal completely ignores that and wipes it away. That is a mistake.

The Opposition are following along the right lines of our proposals, but their proposals are a mistake. That is why I want to get to the bottom of the five-point plan, which does not help what the right hon. Member for Edinburgh South West (Mr Darling) and Government Members have said is the key to this issue—small business. In my constituency, every two weeks I see a small business that has the potential for orders, and that needs that an extra shed or machine to meet those orders, or that could take on an extra few people, but cannot get the capital. The Federation of Small Businesses has said that 30% of small businesses are in that position—they are missing out on capturing growth because of a lack of capital investment. That is why I welcome the coalition’s plan for credit easing in the autumn statement. That is vital.

I welcome the decision to give Lancashire an enterprise zone. The problem with enterprise zones in the past was the relocation of existing businesses. I have a suggestion for the Government: I do not see why we do not declare every university campus an enterprise zone. Overnight it would create what we are supposed to be helping to create: new-scale business.

There is a need out there. There are businesses with orders, but we need the credibility that the Government have given to the finances. I look forward to the autumn statement, and to building on what I believe is a sustainable amount of growth, and sustainable support for small business.

18:30

[Kerry McCarthy (Bristol East) (Lab)]

May I say what a pleasure it was to work with the shadow Chancellor and the rest of the shadow Treasury team over the past year? Although I have moved on to pastures new, I am very happy to speak in support of their motion today.

As we have heard, in the past nine months, the UK economy has not grown at all. Forecasts have had to be revised downwards, and the future prospects for growth are bleak, given the scale of Government cuts and the Chancellor’s failure to acknowledge that in fragile economic times a slash-and-burn policy, far from stimulating growth and bringing down the deficit, will cause growth to flatline. It will actually cost us more as a result of decreasing tax receipts, increasing benefit payments, people having less money to spend, and the Government having to borrow £46 billion more than they thought they would.

As the head of the International Monetary Fund, Christine Lagarde, warned that slamming on the brakes too quickly will hurt the recovery and worsen job prospects, yet the Chancellor is failing to heed the warning signs. Economic indicators such as today’s unemployment figures, which are devastating for people in areas such as my constituency, tell the Chancellor that not only is he going too fast, but he is on completely the wrong road. We do need to reduce the deficit, but at a pace that does not harm economic growth. Labour’s plan for growth involves bringing forward long-term investment projects for schools, roads and transport, building 25,000 more affordable homes, and creating 100,000 jobs for young people, funded by a £2-billion tax on bankers’ bonuses. That is what my constituents want a Government to do.

In my constituency, I see the impact of Government policies mounting up in a multitude of individually small but cumulatively large ways. For example, there is the public sector worker who has had a pay freeze, is paying 2.5% more VAT, has had their child care tax credits cut from 80% to 70%, and will soon have to contribute 3% more to their pension. That is not to mention the rise in inflation, how much more it costs to fill a tank with petrol, ever-rising fuel bills, or the extra pounds that the weekly food shopping costs. There are also the local services that people now have to pay for, and that used not to come at a cost.

This week, we have heard a stark warning from the Institute for Fiscal Studies and the Joseph Rowntree Foundation about the impact that the Government’s policies are having on child poverty. I was there, in the previous Parliament, when all the party leaders and MPs from all parties rushed to sign up to the child poverty pledge to commit to abolishing child poverty within a generation. There was a cosy air of cross-party consensus. As one of the MPs who had been working closely with the End Child Poverty coalition, I did not want to say or do anything to derail that, but I was quietly highly sceptical. There were warm words and MPs posing with marker pens as they signed the pledge as part of a photo opportunity, so that they would appear in their local papers.

[Charlie Elphicke]

Will the hon. Lady give way?

[Kerry McCarthy]

No, I do not have time. I was highly sceptical that the pledges would translate into real action if the Conservative party got into Government. Sadly, my scepticism has proved well founded. The IFS warned yesterday that the Government’s tax and benefit changes will push 400,000 children into relative poverty by 2015. The number of children in absolute poverty will rise by 500,000 to 3 million. Instead of us eradicating child poverty by 2020, the Government’s policies mean that 3.3 million children—one in four children in the UK—will be in relative poverty. Labour when in government lifted nearly 1 million children out of poverty; this Government will put another generation of children right back there. It is little wonder that the chief executive of the Child Poverty Action Group described it as a “devastating report”. She said:

“Ministers seem to be in denial that, under current policies, their legacy threatens to be the worst poverty record of any government for a generation.”

[Sheila Gilmore]

Does my hon. Friend agree that on top of the benefit changes, one of the big things that will cause increased child poverty is the increased level of women’s unemployment, particularly because of the huge cuts in the public sector, which will affect women and then affect their children and plunge them into poverty?

[Kerry McCarthy]

My hon. Friend makes a valid point, which is another sign of the devastating impact of the Government’s policies. As I said, everything mounts up together; taken individually, it might not seem that they are doing much harm, but people are beginning to feel the pain and beginning to realise how much more pain is round the corner, not just for them, but for their children.

In the limited time available to me, I shall talk about unemployment, which in my constituency has risen by almost a quarter in the past year. Bristol was fortunate to be chosen as the site for one of the Government’s new enterprise zones. Unlike the hon. Member for Lancaster and Fleetwood (Eric Ollerenshaw), I can just about remember what they are called. The council says that that has the potential to create 17,000 new jobs, which is good, but that is over a 25-year period. We need jobs now.

A report by the Work Foundation concluded that

“evidence suggests that Enterprise Zones…are likely to be ineffective at stimulating sustainable economic growth in depressed areas.”

A Centre for Cities report found that the cost of each new job created in enterprise zones over 10 years would be £26,000, which compares with £6,500 to creating a job for a young person under the future jobs fund and just £3,500 for the new deal for young people.

I left school in the 1980s and nearly all my friends spent years on the dole, their prospects of employment bleak, with long spells of unemployment interspersed with the occasional futile training scheme that did nothing to land them a job at the end of it. They thought they would never work, never own their own homes, never be able to afford to have a family. This Government seem intent on recreating that Thatcherite nightmare, with nearly 1 million young people now unemployed. We cannot consign another generation to the scrapheap. Labour’s plans to create 100,000 jobs for young people are what is needed now. That is why I support the motion.

18:37

[Rachel Reeves (Leeds West) (Lab)]

It is a privilege to wind up this debate as shadow Chief Secretary to the Treasury. I may be new to the job, but after five hours of debate today I am still no clearer on this Government’s plan for jobs and for growth. Even on the day when unemployment has reached a 17-year high, the Government have no plan for jobs and for growth. Today’s numbers are proof that plan A has failed.

While Government Members say that there is no alternative to the policies being pursued by the Government, the Opposition have put forward a five-point plan for jobs and growth which was set out by my right hon. Friend the Member for Morley and Outwood (Ed Balls), the shadow Chancellor, and supported by Opposition Members. My right hon. Friend the Member for Edinburgh South West (Mr Darling) reminded us that a year and a half ago, the economy was growing and unemployment was falling. How different from today. My hon. Friend the Member for Hackney South and Shoreditch (Meg Hillier) gave a vivid account of the impact that the Government’s policies are having on constituents in Hackney.

We heard about plans for jobs and growth rooted in the constituency experience from my hon. Friends the Members for Leeds East (Mr Mudie) and for Gateshead (Ian Mearns), my right hon. Friend the Member for Holborn and St Pancras (Frank Dobson), my hon. Friends the Members for Middlesbrough (Sir Stuart Bell), for Wolverhampton North East (Emma Reynolds), for Coventry North West (Mr Robinson), for Bassetlaw (John Mann) and for Great Grimsby (Austin Mitchell), my right hon. Friend the Member for Oldham West and Royton (Mr Meacher) and my hon. Friend the Member for Bristol East (Kerry McCarthy).

From the Government Benches we also heard some constructive speeches, particularly from the hon. Members for Chichester (Mr Tyrie), for Sevenoaks (Michael Fallon) and for Aberconwy (Guto Bebb). Some Government Members, however, defended plan A 100% but none of them, remarkably, wanted to talk about unemployment in their constituencies. One hon. Member gave a speech not even knowing that unemployment in his constituency was up 29.2% in a year. If that is not proof that plan A has failed, I do not know what is.

Let me rebut some of the Greek myths that we heard from the hon. Members for Spelthorne (Kwasi Kwarteng), for Rossendale and Darwen (Jake Berry) and for Bromsgrove (Sajid Javid), which they use as a smokescreen for their austerity programme. First, UK debt is just over 60% of GDP; in Greece it is over 150%. Secondly, the average maturity of our debt is roughly 13 years, compared with around six years in Greece. Thirdly, bond yields were falling in the UK ahead of the general election, but they were rising in Greece. Fourthly, Greece is part of the eurozone and so, unlike the UK, cannot devalue its currency. This is a story of two very different economies. The Greek defence for austerity simply does not add up.

I urge hon. Members to look at the facts. We have great British businesses, great British industries, great universities and people in all our constituencies who want to work hard and get on. Let us celebrate and build upon our successes, rather than talking Britain down. Instead of the mantra of resignation and defeat from Government Members, the shadow Chancellor has set out practical policies for jobs and growth. What a contrast and what a different message on how to support families feeling the impact of rising energy and food prices. What a different message to businesses worried about sales and accessing finance. What a different message to young people looking at the prospect of enormous debts when they leave university, with less and less hope of getting a job.

When Labour left office unemployment was falling, but today’s figures show that unemployment, at 2.57 million, is higher now than at any point during the recession, at a level last seen under a Tory Government. Youth unemployment, at 991,000, is the highest ever on record and is inching ever closer to 1 million. Unemployment for women has increased by 40,000 since May and is now above 1 million, the highest level since 1988. Last week’s GDP revisions show that GDP estimates for the second quarter had halved to just 0.1%.

Households are feeling the biggest squeeze on their income for 35 years, but our out-of-touch Prime Minister lectures hard-pressed families to pay off their credit card bills right now. Tell that to the ordinary families coping with the effects of the Government’s VAT hike. Tell that to the struggling small businesses trying to access credit from the banks. Tell that to the anxious young person who cannot even get a job. It is also crazy economics. Of course we all need to be prudent, but the Institute for Public Policy Research has calculated that if everyone were to pay off their credit card debts, consumer spending would be reduced by 6% and GDP would fall by 4%.

Growth has flatlined for nine months, starting before the European debt crisis. We have heard the Chancellor’s excuses. First he blamed the snow, then the royal wedding and now Europe. When will the Government stand up and take responsibility for their actions? The managing director of the IMF, Christine Lagarde, says growth is necessary for fiscal credibility, and she is right. It is because the economy has ground to a halt and unemployment is at 2.57 million that the Office for Budget Responsibility now forecasts that we will borrow £46 billion more over this Parliament than planned.

It is not possible to reduce the budget deficit while paying more in benefits and getting less through taxation. Austerity alone will not reduce the budget deficit without a plan for jobs and growth. As my right hon. Friend the Member for Edinburgh South West reminded us, 18 months ago unemployment was falling, and as my right hon. Friend the shadow Chancellor noted, John Maynard Keynes once said:

“When the facts change, I change my mind.”

John Maynard Keynes was a Liberal, and so too was the Chief Secretary to the Treasury. When he was a Liberal he said:

“We are in real danger of condemning a generation of young people to a cycle of unemployment and low expectations.”

How very prescient—on the day when figures reveal that youth unemployment has gone up to 991,000 under his watch. The Liberal Democrats were once progressives, but now they just represent failed economics, implementing the reckless policies that they said before the election would not work.

There has been much debate this afternoon about the growth strategy that the Government promised, instead of which we have simply had a strategy for failure. They increased VAT, costing families £450 a year, and cancelled the loan to Sheffield Forgemasters so that high-skilled jobs are now going to South Korea rather than south Yorkshire. They scrapped the regional development agencies and replaced them with a regional growth fund that is yet to spend a single penny. The Government have introduced what the Governor of the Bank of England described as the “weakest possible measures” to get banks lending—a ringing endorsement of their Project Merlin. Today the Government have announced the guarantee of a job interview for 50,000 young people, but young people want not just an interview but a guaranteed job or training—a real opportunity, which they had under a Labour Government before the general election and before the future jobs fund was scrapped by this Government. With policies such as these from the Government, no wonder the economic recovery has ground to a halt.

[Ian Lucas (Wrexham) (Lab)]

One of the most dreadful things that this Government are doing is that when they do spend money, for example on the rail or helicopter contracts, they do not support British businesses such as Bombardier and AgustaWestland but spend money on jobs and growth abroad. Should we not be spending British taxpayers’ money to preserve British jobs?

[Rachel Reeves]

I could not agree more with my hon. Friend, with 1,000 jobs going at Bombardier and Government policies putting people out of work and businesses out of business.

While the Government offer no relief, at least the Bank of England is offering some leadership, with an extra £75 billion through quantitative easing, which the Chancellor described just two years ago as

“the last resort of desperate governments when all…other policies have failed”.

Let me be frank. The last Labour Government were desperate to avoid a global recession becoming a global depression; desperate to ensure that unemployment did not hit the 3 million mark, as it did in the recessions of the 1980s and 1990s; and desperate to avoid the business failures and home repossessions that scarred our country in Tory recessions. Government Members should be desperate today, because unemployment is at a 17-year high, because borrowing in August reached a record high, because growth has stalled, and because plan A has failed.

Today, as we see the unemployment numbers, it would be nice to have a Government who reacted and said they have got it wrong. Instead, it takes Labour to come to the Chamber with a five-point plan: a £2 billion tax on bank bonuses and a guarantee of a job for young people; bringing forward long-term investment projects to get people back to work; cutting VAT temporarily to give immediate help to our high streets and to struggling families and pensioners; cutting VAT to 5% on home improvement repairs; and a one-year national insurance tax break for every small firm taking on extra workers. That is a five-point alternative that offers hope and unlocks opportunity.

We can call it what we will—plan A-plus, plan B, or the five-point plan—but this Government must come up with an alternative to help families struggling with rising prices and stagnant wages, to help businesses that cannot get a loan and are scared to take on new workers, to help young people who are facing record youth employment, and to help pensioners facing higher gas and electricity bills this winter. This Government must act for every struggling family, for every struggling business, and for every pensioner. They must act, with Labour’s five-point plan, to unlock the potential of every young person in Britain, to create jobs, and to get our economy growing. Their plan has failed. I urge hon. Members to support this motion.

18:48

[The Chief Secretary to the Treasury (Danny Alexander)]

This has been a very good debate in which we have heard 31 contributions from Back-Bench colleagues on both sides of the House. The right hon. Member for Edinburgh South West (Mr Darling) made clear his continuing support for paying our subscriptions to the IMF. We heard particularly passionate speeches by the hon. Member for Islwyn (Chris Evans) and my hon. Friend the Member for South Staffordshire (Gavin Williamson), who made strong pitches on behalf of their constituents, as did many other hon. Members.

Let me take this opportunity to congratulate the shadow Chief Secretary to the Treasury on her appointment. The hon. Member for Bassetlaw (John Mann) made a pitch for her job, but I think she is quite safe. She has a tough job to do in controlling the free-spending instincts of many of her colleagues. The Chancellor referred to the £11 billion cost of a commitment made in amendments that she tabled to the Pensions Bill on her last day as shadow Pensions Minister, and I hope that others will not follow her example.

The shadow Chief Secretary will have to think carefully about whom she asks for advice. Perhaps she could ask the shadow Chancellor, or perhaps not. Perhaps she could ask my predecessor but one, the right hon. Member for Birmingham, Hodge Hill (Mr Byrne), who left a message for my predecessor saying that there was no money left. That is not the only message that he has left recently. [Interruption.] Calm down. My hon. Friend the Member for Portsmouth North (Penny Mordaunt) received a message yesterday on her answering machine from the right hon. Member for Birmingham, Hodge Hill saying, “Could you put in to speak tomorrow? The shadow Chancellor needs all the help he can get.” It is to be assumed that he had confused my hon. Friend the Member for Portsmouth North with the hon. Member for Newport East (Jessica Morden), who is next to her in the House of Commons telephone directory. Perhaps the shadow Chief Secretary could turn for advice to her former boss, the Governor of the Bank of England, who last year backed this Government’s strong and powerful deficit reduction plan, and who last week reiterated that this Government have a credible plan to repay our debts. In the end, the test for her and her party will be whether they have plans that are in any way credible. On today’s evidence, the answer is no.

I will answer a couple of the questions that have been asked about Labour’s plans. It has set out plans today for the Pensions Bill that would cost an additional £31 billion of debt. Somebody asked what the interest on that would cost. It would cost £1.2 billion a year or £3.2 million a day. That is just on the spending commitments that Labour has made this week.

Likewise, the shadow Chancellor seems somewhat confused about his own policy on the switch from RPI to CPI. As I understand it, he will support the switch, for which I am grateful, for three years. That means that he will seek to reverse it in 2014-15. That would cost an extra £6 billion at the end of this Parliament. The shadow Chief Secretary has her work cut out with the shadow Chancellor, as well as with everyone else. That is why I say that only the Liberal Democrats and the Conservatives have a credible economic plan.

As many speakers in this debate have recognised, when we came into government we inherited the largest peacetime deficit this country has ever faced. We were borrowing one pound for every four that we spent. We were on a completely unsustainable trajectory, which compelled Standard & Poor’s to put the UK’s triple A rating on negative watch. We had to take the difficult and sometimes unpopular decisions to pull the country out of that hole. We are taking action not because it is easy, but because it is the right thing to do in the national interest. We are already seeing the benefits from our plan.

[Sheila Gilmore]

I wonder whether the right hon. Gentleman will apologise to all the people who voted Liberal Democrat having heard his party say in the election campaign that to cut too fast would be detrimental to the economy.

[Danny Alexander]

No, I will not because our plan for deficit reduction is necessary to restore the credibility of this country’s finances. If there is any apologising to be done, it is from Opposition Members.

As I was saying, we are already seeing the benefits from our plan. Standard & Poor’s took the UK’s rating off negative watch and reaffirmed our rating in its latest report.

[Several hon. Members]

rose—

[Danny Alexander]

I will not give way because I have little time to get through the points made in the debate.

Standard & Poor’s warned that our rating would come under pressure if the Government faltered in their commitment to fiscal consolidation. The markets have also backed us. When we came into government our gilt yields were tracking the likes of Spain and Italy. Since then, our yields have fallen to follow those of Germany.

Our plan makes a real difference to households and businesses. It allows families to stay in their homes and businesses to refinance their debt. As the Chancellor said, without a credible plan, interest rates would rise. A 1% rise in interest rates would take £10 billion out of the pockets of British families through higher mortgage costs, leading to higher repossessions and more job losses. That is the Opposition’s plan.

[Ian Lucas]

I am very grateful to the right hon. Gentleman for giving way. Given that youth unemployment is today approaching 1 million and that as a Liberal Democrat he touted for votes by offering the abolition of fees and by pursuing the policy of the Labour party, rather than the policy he is now pursuing, does he not think that it is entirely understandable that young people have no faith in politics? Should he not say sorry?

[Danny Alexander]

No, the hon. Gentleman should say sorry, and of course we are supporting Airbus, in his part of the country, as part of our strategy for creating jobs.

We have only to look across the eurozone to see the costs of political indecision and the price that comes from consolidating at the behest of the market rather than taking charge of one’s own destiny, as the Government have. We have seen the problems in the eurozone and are working to help, but we already have flexibility in our own plan. By taking the tough decisions that we have on fiscal policy, we have provided the space in which the Bank of England can act. In the Governor’s own words,

“monetary policy is the right way to take the strain of changes in the world economy.”

As we have already said, we are considering credit easing options as a way to inject money directly into the business sector. We will provide further details in the autumn statement, and I am grateful for the welcome given to that policy on both sides of the House.

Of course, today’s unemployment figures are a reminder of the difficult task that we face. Unemployment is not merely a statistic; it is a high cost for the individuals and families concerned. It is not a price worth paying, and that is why we will be relentless in our pursuit of growth.

[Geraint Davies]

Will the Chief Secretary give way?

[Matthew Hancock]

Will my right hon. Friend give way?

[Danny Alexander]

I will not. I only have a few minutes left.

We will not return to growth on the back of debt-fuelled consumption.

[Chris Ruane (Vale of Clwyd) (Lab)]

Will the right hon. Gentleman give way?

[Danny Alexander]

No, I will not.

We will not return to growth on the back of what we might call predatory growth, based on spending money we do not have, so that when the music stops and the bills fall due, they have to be paid for by the rest of us. Instead, we are committed to building a new model of growth powered by investment, exports and enterprise, for example by investing in infrastructure. Over the four years of this spending review period, we will invest more in transport infrastructure than our predecessors managed in the previous four years.

[Rachel Reeves]

Before the general election, the Secretary of State for Business, Innovation and Skills said:

“Cuts without economic growth will not deal with the deficit.”

Does the Chief Secretary agree?

[Danny Alexander]

I do, and I am about to set out exactly what this Government are doing for economic growth, if I can be allowed two or three more minutes to fill in that point.

As I was saying, we are investing in infrastructure. Only two weeks ago, I announced the creation of a new “Growing Places” fund—half a billion pounds that will kick-start developments that are currently stalled, deliver on key infrastructure and create jobs.

As my hon. Friend the Member for South West Norfolk (Elizabeth Truss) said, we also have to stop the decay in our competitiveness that has marred the past decade. so we are cutting corporation tax to 23% by 2014, taking it to the lowest rate in the G7. We will increase the SME rate of research and development tax credits to 225% by April 2012, and we are tackling the problems of the imbalances in growth between regions, which a number of Members on both sides of the House have raised. That is why today, the Business Secretary announced the first of our new technology and innovation centres that are being established, and why we have committed £1.4 billion to the regional growth fund, which has committed to projects in the north-east, the north-west and across the country.

As the hon. Member for Middlesbrough (Sir Stuart Bell) rightly observed, we have also announced 22 enterprise zones that will attract hundreds of new start-up enterprises and create thousands of jobs by 2015. We are ensuring, too, that our young people have the skills to seize their opportunities through the recovery. We are supporting more apprenticeships than any previous Government—by the end of this Parliament we will deliver 250,000 more than the previous Government planned, on top of a total of 100,000 work experience placements.

I know that this is a difficult time for many people and families across the country, and that it is not much comfort to say that it would be very much worse if it were not for this Government’s determination to fix the failures of the past.

[Ms Rosie Winterton (Doncaster Central) (Lab)]

claimed to move the closure (Standing Order No. 36).

Question put forthwith, That the Question be now put.

Question agreed to.

Main Question accordingly put.

18:59

Division 365

Ayes: 244

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Labour: 230
Scottish National Party: 6
Plaid Cymru: 3
Democratic Unionist Party: 3
Social Democratic & Labour Party: 1
Independent: 1

Noes: 315

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Conservative: 265
Liberal Democrat: 48

Business without Debate

Wednesday 12th October 2011 Commons Chamber

Business of the House

Motion made, and Question put forthwith (Standing Orders Nos. 15 and 41A),

That, at this day’s sitting, proceedings on the Motion in the name of Sir George Young relating to Business of the House (17 October) may be proceeded with, though opposed, until any hour, and Standing Order No. 41A (Deferred divisions) shall not apply.—(Bill Wiggin.)

Question agreed to.

Business of the House (17 October)

Wednesday 12th October 2011 Commons Chamber

19:15

[The Parliamentary Secretary, Office of the Leader of the House of Commons (Mr David Heath)]

I beg to move,

That, at the sitting on Monday 17 October, notwithstanding Standing Order No. 14(3A) (Arrangement of public business), the Speaker shall put the Questions necessary to dispose of the proceedings on the Motion in the name of Sir George Young relating to the Parliamentary Contributory Pension Fund not later than two hours after the commencement of proceedings on the Motion; and such Questions shall include the Questions on any Amendments selected by the Speaker which may then be moved.

I do not want to detain the House any longer than necessary on this issue. The motion provides for two hours of debate on the Government motion on pensions on Monday. It provides certainty for the House, and it is necessary as the day is being shared with a debate scheduled by the Backbench Business Committee on the Hillsborough disaster. That is the first debate in this Chamber that has resulted from the new e-petition system introduced by the Government.

[Mr Peter Bone (Wellingborough) (Con)]

Would it not be better to protect the Hillsborough debate by stating that there should be a minimum of three hours for it, so that it could go beyond the moment of interruption? Otherwise, if there are statements or urgent questions on Monday, the Hillsborough debate could be squeezed to one and a half hours.

[Mr Heath]

I have to say that I believe the programme motion does provide the required protection. It is a sensible procedural motion, and it is my great regret that we have to debate it at any length this evening. The mood of the House was apparent last night during the various points of order on this matter. The debate on the Hillsborough disaster was supported by nearly 100 Members of the House when presented to the Backbench Business Committee. It also has the support of more than 139,000 members of the public who signed the e-petition supporting the debate. Members of the House have been liaising with the many hundreds of people who intend to travel to London on Monday to listen to the debate, many of whom will be bereaved families of those who lost their lives in the tragedy.

The hon. Member for Liverpool, Walton (Steve Rotheram) asked a question of the Prime Minister earlier today. He said:

“Does he understand that the perception out there in the real world is that some MPs would rather talk about their own pensions than discuss a 22-year-old injustice and the deaths of 96 men, women and children?”

I have to say that if the House were unable to agree to this motion this evening, that is exactly the impression that would be given. I want to avoid that, which is why I commend the motion to the House.

19:18

[Angela Smith (Penistone and Stocksbridge) (Lab)]

I support the Deputy Leader of the House’s comments, and I want to remind the House that it should bear in mind when making its decision on the motion how it will look to the country. Do parliamentarians want to give the impression that they are more interested in their personal financial interests—their pensions, no less—than in the issues that concern the people they represent? Do Members of the House want to be seen to be gazing at their own navel at the expense of doing their proper job, which is to respond to the issues that matter to the people we represent? The Hillsborough disaster is pertinent not only to the people of Liverpool, Sheffield and Nottingham. Those who have signed the petition want justice for the 96 who died and for their families, and in that sense it is relevant to every Member of the House. I urge colleagues to support the motion tabled in the name of the Leader of the House.

Question put and agreed to.

Business without Debate

Wednesday 12th October 2011 Commons Chamber

Business of the House (13 October)

Motion made,

That, at the sitting on Thursday 13 October—

(1) the Speaker shall put the Questions necessary to dispose of proceedings on the Motions in the name of Mr Greg Knight relating to Hand-held Electronic Devices in the Chamber, Select Committee Amendments, Explanatory Statements on Amendments to Bills, and Written Parliamentary Questions not later than one and a half hours after their commencement; and such Questions shall include the Questions on any Amendments selected by the Speaker which may then be moved;

(2) proceedings on the Motion in the name of Mr Greg Knight on Ministerial Statements may continue until three hours after commencement of proceedings on the Motions specified in paragraph (1), and shall then lapse if not previously disposed of.—(Bill Wiggin.)

[Hon. Members]

Object.

Adjournment

Wednesday 12th October 2011 Commons Chamber

Resolved, That this House do now adjourn.—(Bill Wiggin.)

19:20

House adjourned.

Deferred Division

Wednesday 12th October 2011 Commons Chamber

Tribunals and inquiries

That the draft First-tier Tribunal (Immigration and Asylum Chamber) Fees Order 2011, which was laid before this House on 12 July, be approved.

Division 364

Ayes: 309

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Conservative: 256
Liberal Democrat: 43
Democratic Unionist Party: 6
Independent: 1
Labour: 1

Noes: 20

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Labour: 10
Scottish National Party: 6
Social Democratic & Labour Party: 3
Plaid Cymru: 3
Green Party: 1