Economic Growth

Andrea Leadsom Excerpts

Wednesday 15th May 2013 Commons Chamber

[Ed Balls]

I want to make some progress, then I will take some more interventions.

This is not simply the Queen’s Speech of a coalition Government who have ground to a halt; it is much worse than that. At a time when living standards are falling; when child poverty is rising; when more than 950,000 young people are out of work; when, as we learned today, unemployment is rising again and is now higher than at the general election; when, as we also learned today, prices are rising four times faster than wages in our economy; when our economy has flatlined for three years; when overall business investment has stalled and actually fallen in the past two years; when, as a result, our triple A credit rating has been downgraded; when the Office for Budget Responsibility says that the deficit reduction plan has completely stalled; and when the International Monetary Fund is now in town saying that the Chancellor is “playing with fire” by sticking to his failing plan, you would think that the priority for the Prime Minister, the Chancellor, the Cabinet and the Conservative party would be to see what they could do to boost economic growth and long-term investment in our country. But no, it seems that that is not their priority.

[Andrea Leadsom (South Northamptonshire) (Con)]

We have already had a credit downgrade from one of the agencies, and the agency made it clear that that was a result of the problems that our economy has had in recovering. Is the right hon. Gentleman not concerned that if we were to abandon our plans, there could be a further downgrade? If we simply did as he suggests and opened the floodgates to more debt and borrowing, we would put our economy into severe crisis as a result of rising interest rates and a lack of credibility in international markets.

[Ed Balls]

I ask the hon. Lady to reflect for a moment on the logic of her position. For the past three years, she and the Chancellor have consistently said that they had to stick to the plan, even though growth was low, even though the deficit was not coming down and even though living standards were under pressure, because otherwise they would lose the triple A credit rating. Now they have lost the triple A rating, but they still maintain that they have to stick to the plan. That is completely illogical. The credit rating agency said in terms that it had downgraded us because there was no growth in the economy, and that that was choking off deficit reduction. Sticking with a failing plan that is not working and that has resulted in the deficit reduction being stalled is not the way to keep our credit rating—if that is the Government’s objective. The way to keep it is to get the economy moving, get people investing and get people back into long-term sustainable jobs. Until we do that, the Chancellor is going to continue to fail.

[Andrea Leadsom]

rose—

[Ed Balls]

If the hon. Lady would like to have another go, I am happy to give way to her.

[Andrea Leadsom]

I am grateful to the right hon. Gentleman for letting me have another go. I put it to him that he really does not understand the point about the credit rating agency in this context. The whole point about confidence in the British economy is that people need confidence in Britain’s ability to get out of the economic mess that his Government left us in. This is not about the absolute level; it is about market confidence. He must surely understand that keeping a very good credit rating is essential in order to have an affordable cost of borrowing.

[Ed Balls]

I do not want to prolong this argument, but I must explain to the hon. Lady the term structure of interest rates. The 10-year bond yields are the accumulation of market expectations of three-month interest rates added up every three months over 10 years. Why are our long-term interest rates so low? It is because people think that short-term rates are going to stay low because the economy is flat on its back. People would have to be economically illiterate to think that our long-term interest rates were driven by market confidence at a time when we are being downgraded by the agencies. Our long-term interest rates are low because our economy is not growing.