Budget Resolutions and Economic Situation

Debate between Adrian Bailey and Andrew Selous

Wednesday 20th March 2013 Commons Chamber

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

I think I could summarise the Budget with a slightly nautical metaphor: the message from the bridge to the economic engine room is, “Steady as we sink.” The Budget does not recognise the scale of this country’s problems, and although some of the measures that have been announced may be good in a micro sense, they are totally inadequate to combat the macro problems that we have.

Let me go back to the months immediately after the May 2010 general election and the emergency Budget. Although under the Labour Government we had had economic growth, the budget deficit and inflation were falling and employment was rising, and we were told that that was extremely dangerous. The Chancellor conjured up an apocalyptic vision of an economy that was about to be devastated by a reduction in our triple A rating.

Three years on, we have lost our triple A rating, the economy is at best stagnating and at worst falling, we are having to borrow more and inflation is rising, yet we are told that it is all so good that we must have it for several more years. I feel that the electorate—like me—are beginning to doubt the credibility of that argument. I recognise that the carefully choreographed political narrative that was built up after 2010 had some traction, but that traction is going as a result of the incompetence and lack of vision displayed by the Chancellor since then.

[Andrew Selous]

Does the hon. Gentleman recognise that the Government’s borrowing costs have fallen since we lost our triple A rating, precisely because the international markets believe in the credibility of the Government’s economic policy?

[Mr Bailey]

I think those costs have dropped by 0.15%, which the public might think—well, shall we say that they have had to bear a huge sacrifice for a minimal improvement and drop in interest rates? I am concerned—this point has not been mentioned by anyone in the House, including those on the Front Benches—that the Government’s current predictions are based on December figures from the Office for Budget Responsibility. We might think that that is okay, but since May 2010 the OBR’s predictions have been conspicuously inaccurate and over-optimistic. If its predictions for the next two years are equally inaccurate and over-optimistic, we are in real trouble. That may not be the case, but if we look at the Library research papers, most other independent commentators and assessors of our economic position predict a lower rate of growth than the OBR. That is of concern and underlines the Chancellor’s failure to put in place measures to combat that issue.

On the opportunities available currently in the economy, the emergency Budget, in order to be successful and meet the Chancellor’s targets, was predicated on an assumption of exceptionally high investment and exports. Since then, the eurozone has had problems. It takes 47% of our exports but is the lowest-growing export market.