Jobs and Growth

Debate between Lord Tyrie and Lord Mann

Wednesday 12th October 2011 Commons Chamber

[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.