Jobs and Growth

Austin Mitchell Excerpts

Wednesday 12th October 2011 Commons Chamber

[Austin Mitchell (Great Grimsby) (Lab)]

I knew something was desperately wrong with Government economic policy when I heard last week that the Prime Minister had to be forcibly restrained from telling us all to pay off our credit card debts. It was as though he had never taken a degree at Oxford in PPE—politics, philosophy and economics—with first-class honours or had learned nothing from it. I think his father would be well qualified to ask for his money back from Oxford, because that goes directly against Keynes’s advice on the savings fallacy, which is “The more you save, the more you compound recession.” It also runs against the advice of the Office for Budget Responsibility, which predicated what pathetic growth is going to occur the next year on consumers building up consumer debt to pay for products, increasing demand.

I cannot launch the same accusation against the Chancellor because he took a history degree. He does understand economics, but as far as I can see he thinks he is the reincarnation of Montagu Norman: he has the same policy and economics as him. Neither of them, in their obsession with debt and borrowing—also well exemplified in the last speech—shows any consideration, or knowledge, of demand. Because demand is so weak in our economy, there will be no investment, and if there is no investment, there is no increase in production and no increase in employment. If there is no increase in either of them, there is no growth, yet it is only growth that will allow us to pay off the debt we have accumulated. Demand is the key problem, and the obsession with debt obscures it. Instead, the Government compound the problem by cuts that are going to kill recovery.

The folly of that is that we are freer than any other country to act for ourselves and to take measures to expand the economy and boost demand. Europe is locked into the euro crisis—a self-generated crisis—from which we were saved by my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown), who, thank heavens, kept us out of the euro. Greece and the other Club Med economies, which must include Ireland now that the gulf stream is warming up the Irish economy, cannot devalue or escape from the crisis by reducing interest rates, so they are trapped. We are not. We can reduce interest rates, and we can devalue; indeed, we have devalued. We can use all the weapons of economic management that the euro prevents.

Nor are we in the same trap as America. Its President is effectively trapped by a Republican Congress whose members have “Tea Party economics” embossed on their foreheads, and can neither increase taxation nor boost spending. We are free to act—yet that freedom has been abused by action that is directly counter-productive, and based on piggy-bank economics rather than any manifestation of economic sense. Such a policy would be appropriate for a Government of millionaires who could sit comfortably on the piles of their money and say, “A few more sacrifices from the working class, a few more unemployed, a few more public servants fired, and we’ll all be better off: Britain will win through thanks to the sacrifices of other people.” However, it bears no relation to economic sense, so it will not work.

Our recovery was always going to be slower. The recession hit harder here because of the exaggerated financial sector that has resulted from the destruction of so much of our manufacturing—particularly the Thatcher destruction of the 1980s—and the fact that so much of it is now foreign-owned. However, we must not compound our difficulty and make recovery even slower by dragging out a period of low growth. Unless policy is reversed and we have a plan B—I have a name for the great day when policy is reversed; I am going to call it national B-Day—we shall be doomed to a winter that will be hard, miserable and tough, in which unemployment will increase, more people will be put out of work to increase Government borrowing and Government debt, and more small businesses will be destroyed.