Department for Business, Innovation and Skills (Performance)

Debate between Adrian Bailey and Sam Gyimah

Wednesday 2nd February 2011 Commons Chamber

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

Let me start by saying that, on a personal level, I know from my discussions with Ministers that they are personally committed to the growth agenda. My reason for speaking in this debate is that I feel that they have failed to get their personal priorities and commitment translated across the rest of Government policy. Current Government policy on the economy and growth is politically driven and fundamentally economically flawed. Above all—even if one does not accept those first two premises—it is totally incoherent in its application.

The Secretary of State spoke at length about the comments of the former director-general of the CBI, Richard Lambert, but he failed to mention Mr Lambert’s subsequent comments:

“But my argument this morning is that the Government has not been nearly so consistent and focussed when it comes to policies that support growth. It’s failed so far to articulate in big picture terms its vision of what the UK economy might become under its stewardship.”

He went on—this is the crux of the matter:

“And it’s taken a series of policy initiatives for political reasons, apparently careless of the damage that they might do to business and to job creation.”

We must emphasise the importance of job creation and growth in dealing with the deficit. Mr Lambert pointed out in the same speech that the deficit was partly a result of public spending last year being up by 3% from 2008, but was, above all, because tax receipts were down by 13%. One would reasonably expect, in a policy designed to eliminate the deficit, that there would be a balance of measures designed to cut public spending and get economic growth, but what we have had are measures designed simply to cut public spending and not to get economic growth.

[Mr Sam Gyimah (East Surrey) (Con)]

The hon. Gentleman says that our policies are not designed to promote economic growth, but what about our tax policy, which will make us one of the lowest-taxed countries in the G7? Will that not generate economic growth?

[Mr Bailey]

I would love to talk about tax policy such as the VAT rise that is cutting demand, particularly in the construction industry, in which 7,500 people are going to be made unemployed as a number of businesses go down. I could go on for a very long time about the Government’s tax policy. Corporation tax cuts will benefit the rich—[Hon. Members: “Oh, come on!”] They will benefit the banking community and those within it, but I want to see an increase in capital allowances, which is what the manufacturing sector wants to enable investment to take place. However, I shall move on.

Let us consider the financial implications of economic growth for tax receipts. A 1% rise in gross domestic product brings in £7.7 billion in tax receipts. Over the lifetime of a Government, a 1% increase in GDP growth would bring in something like £37.5 billion—nearly half the deficit that the Chancellor says we need to cut over this period. It is therefore the responsibility of BIS to push and push for Government priorities to ensure that the elimination of that deficit is effected largely through economic growth, but it has failed to do that. I think that was acknowledged in Mr Lambert’s comments.

The growth White Paper has been abandoned because there was not enough in it—hardly sterling support for industry and the private sector. Some of the policies we are talking about do not involve any expenditure to implement but are about the priorities of other Departments and how they impact on growth. One would reasonably expect BIS to demonstrate to other Departments how they are damaging growth. Localism is one example. We have heard a lot about the abolition of regional development agencies and their replacement with local enterprise partnerships. By abolishing RDAs, the Government stripped away a core of local business support and they put in its place LEPs, which may or may not be successful, but which have not delivered a single job so far.