Economic Prosperity and Employment

Lord Bates Excerpts

Thursday 18th July 2013 Lords Chamber

[Lord Bates]

My Lords, I, too, pay tribute to the noble Lord, Lord Haskel. He has a well deserved reputation for, over many years, seeking to improve the understanding, particularly in the Labour Party, of the role of management of the private sector. Having listened to the speech of the noble Lord, Lord Monks, I suggest that his work is yet undone; he still has much to do in that important area.

The noble Lord, Lord Haskel, sets an important task for us, which is to take,

“note of the role of government in generating economic prosperity and employment”.

That begs the question, “Does it have one?”. Of course, the answer to that is yes. The role of government is to generate economic prosperity through untying the wealth-creation potential of enterprises and allowing them to flourish; to maintain a tight fiscal control on the costs and operations of government, through the avoidance of waste and unnecessary regulation; to construct the tax and benefits system in a way that rewards those who work, cares for those who cannot and incentivises the risk-takers while protecting consumers and upholding fair competition; to provide a stable monetary policy which creates the right balance between borrowers and savers in the economy; to provide the investment in the physical and intellectual infrastructure that we will need for the future; and to maintain and develop strong international trading relationships. In short, the role of government is to prepare the ground and regulate the climate for economic prosperity and employment while recognising that, ultimately, it is enterprises which will actually build and maintain it. That would be my definition of an enabling or entrepreneurial state.

If this is the description, how have the current Government performed? I do not think that many in this House would argue against the proposition that no post-war incoming Government have had a more favourable economic legacy than that which fell into the lap of the Labour Government in 1997; I declare no interest as a Treasury Minister at the time. At the same time, there would not be many who would argue that any incoming Government have had a less favourable economic inheritance from their predecessors than that which befell the current coalition in 2010.

The coalition arrived in office to face a debt that was unsustainable, government spending that was out of control, and a public sector that was too strong, and a private sector too weak, to sustain it. We had grown too dependent on financial services and lost our competitive advantage in manufacturing. We had become obsessed with the old, established markets and trading relationships of Europe, and paid insufficient attention to the rising new markets of Asia and Latin America. We had taken no note of the fact that the tax and benefit system could provide perverse incentives that made not working more attractive than working. Wealth creators and risk takers were insufficiently rewarded. Our education was failing generations of young people through its lack of rigour, and vocational training was not delivering the skills that industry needed.

Three years on, what has been the result? Well, we have seen a reduction in the deficit; it is down by a third. We have seen sustained cuts in corporation tax which will mean that we will have the lowest corporation tax rates in the G20 by 2015. We have seen businesses create 1.3 million new private sector jobs, which is close to three jobs created in the private sector for every one lost in the public sector. This week, we have seen unemployment fall further, by 57,000, and the claimant count fall below the level of May 2010. The reform of the benefits system will ensure that people are always better off in work. Through raising personal tax allowances, people working full time on the minimum wage will have had their income tax bill halved during the time of this Government. We have seen investment in infrastructure. Danny Alexander, the Chief Secretary, announced £100 billion of investment in infrastructure between now and 2020. There were 520,000 apprenticeship starts in the last academic year, up 80% on the last academic year under the previous Government.

We are seeing the evidence for this in increased economic indicators showing, for example, that exports are at records levels according to the British Chamber of Commerce and the purchasing managers’ index. We even see this morning an announcement that retail sales have gone up by 2% in the past year. We see that our exports, particularly to those new, dynamic markets such as Brazil are up 25%, with China up 40% and Russia up 80%. That is extremely welcome.

The culmination of this is that the predictions for a double-dip or triple-dip recession that were so frequently made from the opposition Dispatch Box turn out to have been wrong. There has been a reassessment which shows that we are now into growth, and the IMF has reassessed its forecast to show that it expects this economy to grow strongly. I urge those on the Benches opposite to recognise that it is time for them to reassess the record of this Government and their own policies in the light of that performance.